Stock Market 101 For Beginners
To novices and experts alike, the stock market can sometimes be erratic and enigmatic. We can erase the mystery that clouds the topic and let you know how the market can be unpredictable, and how you can take advantage of this trait.
The stocks in the mutual funds are the same as the ones you have in your IRA and 401K. The same companies in mutual funds are the same in the S&P 500 Index which is the stock market. The S&P 500 Index is a list of the 500 largest companies in the world such as Target, AT&T, Apple, BP, Coke and hundreds more. By watching the S&P 500 Index you can see what and how the overall stock market is doing. Other indexes are the Dow Jones Index but it only has 30 companies and the Nasdaq Index which has many small companies. These two Indexes follow the direction of S&P 500 Index because of its more well known companies.
Unlike today, those corporations were only government owned companies. Asia’s first stock exchange was established in 1875 in Bombay and still functions today as one of the most important markets in the world. Privately owned corporations began in the United States of America, United Kingdom and in other countries in Western Europe in the 19th century.
Today stock markets can be found in every developed and most developing countries. The United States of America, England, Japan, India and China are some of the biggest stock markets in the world. The value of the world stock market was estimated as staggering US $36.6 trillion in October 2008.
Only brokers are authorized to carry out trades. Private investors need to find a suitable brokerage to set up an account with and deal through. The process is no more complex than setting up a bank account and once a brokerage account has been established, you are in control of the buy and sell orders related to it.
Alternatively, you can invest in the stock market through special plans such as those involved with retirement. Examples of such plans are the 401k in America and Individual Retirement Accounts (IRAs). In these instances, you do not have any control over traded stocks. The third way to invest in stocks is via Dividend Reinvestment Plans (DRIPs) or Direct Reinvestment Plans (DIPs), where you do get a say in the stocks you buy or sell.
Stocks listed under the firm are “held in street name” and are insured by governments up to a certain sum, against bankruptcy or fraud of the brokerage firm. Of course, you get no such guarantee for stocks listed under your own name, although you will get the actual stock certificates. Most investors choose to have their stocks held in street name because of the massive reduction of paperwork and stress that is instead transferred to their brokers; individuals who are well trained to process, track and store related paperwork.
Do keep a positive attitude. Remember that a good player will always expect and accept losses gracefully. Those who brood over losses will always miss the next profitable opportunity. Always accept failure as a step towards victory. Don’t be afraid. When you enter the market you need to be confident and firm with your decisions. Remember that in trading, there are ‘the quick and the dead’! A strong strategy will be your first step towards building the confidence you need
Do learn from mistakes. Losses make a trader studious. Instead of being disheartened, take advantage of every loss you suffer to improve your knowledge of market action. Experience will be your best teacher. In the world of money nobody has the slightest idea of what will happen next. Thus, the successful trader will not base his moves on what will happen but instead reacts to what is happening in the market. Remember that markets are unpredictable and ill-suited for predictions.
Do Lots of Background Reading and Research. Even if you believe that you have the best broker in the country it is mandatory that you know exactly what is going on in the market. Remember it is your money. In order for you to make the best decisions you must have all the available information. So as well as reading the daily press like Financial Times / Wall Street Journal etc, try to read the trade magazines and annual reports of the firms you have or are hoping to invest in. Don’t be left behind
You should always consider the previous day’s trading range when making a decision. Regardless of your strategy, you should use this as one of the last steps in your checklist to verify your strategy. It is a simple trick. It is a fairly simple task that will bring great benefits.
For other sources visit: Stock Market Timing or http://market-timing.org/stock.aspx
categories: investing