Getting in on a piece of the stock market can be tempting for anyone, but there are a lot of people quite intimated by the process. Despite the popularity of the stock market, not everyone fully understands the ins and outs of what they are investing in. If you are looking to invest with the hopes of only making money, there are many ways you can be successful, but you also need to be prepared that there can also be loss involved. Before you make that first buy, we have created the beginners guide to the stock market and included some of the key things you need to know before getting you started.
Stock Market Definition:
The first thing you should know is what the stock market actually is, and no, this is not the Wall Street definition. The stock market is not an easy system, it is quite complex. According to Merriam-Webster, the stock market is a system for buying or selling stocks. Simple enough, but where do these stocks come from? Stocks are units of ownership in a company and you when buy a stock you are purchasing a share and becoming a shareholder of that company. Today, all trades are now done electronically and depending on the stock, they are done through the stock exchange, where in the past these trades would be done physically.
Stock Market Pricing:
One day stocks are up and the next day the market is down. There are numerous factors as to why stock prices rise and fall, and this change in stock prices are because of supply and demand. What you want to know is that the more sellers than buyers of a stock, the prices will tend to fall. But it also works the other way, when there is more demand for the stock, this means there are more buyers then there are sellers, and this means that stock price will tend to rise. But what dictates supply and demand? Because public companies are required to report their earnings four times a year, this is where professionals analyze the company’s profits to make investment assessments. Along with professional analysis, there are other contributing factors that can also affect the supply and demand of the stock market including: media publications, a new product launch, natural disasters, or the expertise of a professional investor who may have differing opinions of another.
Predicting the Stock Market:
The prediction of a stock price can generate significant profit, which is why to professionals the stock market is often thought of as a competition. But like trying to figure out stock prices, there are many factors in trying to predict stock market performances. Knowing a stocks value is key to purchasing decisions, and to find valuation includes doing plenty of research. Through this research you may also learn about different purchasing decisions others have made, along with any events that may trigger a stocks value. Before jumping into investing knowing what kind of investment you are looking to make, and from there, what you are looking to invest in are the first places to start your research.
Are you looking to begin investing? Learn more with the Toronto stock exchange. Do you currently invest in the stock market? Share your thoughts in the comment section below.