Understanding the Stock Market Made Easy

Understanding the stock market can lead to a more balanced investment portfolio. After all, shares of stocks in a reputable company can boost your earning power, pour money into your account and provide more avenues to earn more money. The fact that learning all about the stock market can be easy makes it all the more attractive to do so.

To understand the inner workings of the stock market, you must understand the unit of value on which it operates on - the share of stock. Basically, one share of stock represents your partial ownership of the issuing company. For example, if the company has 1,000 shares and you own 500 shares, then you have 50 percent ownership of said establishment. Along with it, you have the rights and responsibilities of being part-owner of the company including but not limited to stock dividends and management control.

Stocks can also be categorized into two depending on the rights and responsibilities attached to it - common and preferred. It must be emphasized that common stocks are the shares traded in the stock market while preferred shares are usually held are long-term investments.

Now, moving on to the concept of trading in stocks, these company shares are usually bought and sold in stock exchanges like the NYSE Euronext, NASDAQ and AMEX in the American markets although other countries also have their own stock exchanges. Take note, too, that so-called penny stocks have their own trading venues like the Pink Sheets and the OTCBB. Understanding the stock market often involves learning how these stock exchanges operate on a day-to-day basis.

These stock exchanges are manned by stockbrokers who act as middlemen between the buyers and sellers of stocks. You will find the atmosphere in stock exchanges to be that of a great, big and noisy market although the Internet has made it possible for online trading to be carried out.

Thus, you can do your trading in the comfort of your home. Just instruct your stockbroker when to buy and/or sell the stocks and you are good to go. Well, of course, this is not as easy as it seems for many reasons.

You have to learn everything you can about the stock market from its daily operations, its laws and regulations and, more importantly, the strategies to succeed in such a chaotic atmosphere but surprisingly organized structure. You do not just plunk your money on shares of stocks because you like the company name, or you buy their products, or a guy on television recommended it or just because on a whim.