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stock market investing 101 - Investing In Stocks


-What is stock?
For new investors stock market investing 101 will help you understand what investing in the stock market is all about when it comes to the basics that starting investors don’t understand. So what is stock? You can’t eat stock, you can’t hold stock except on a piece of paper, and you also can’t drink stock or see stock. Stock is simply ownership in a company that is usually backed by assets or debt that the company owns. In other words when you buy a stock in Exxon you are entitled to a small ownership of their company, their assets, AND their debt. So to say you are buying nothing except pie in the sky when you are buy stock is incorrect, because you are buying a small part of a large amount of assets or at least physical goods the company has. Who can legally purchase stocks? Well anyone “generally” who is an American citizen and 18 or over in age can purchase securities as long as they haven’t been convicted of a felony or are wanted anyway by the government etc. Brokers are needed for making the actual purchase though and finding a buyer and seller for the deal. Brokers must be licensed to be able to sell and purchase stock because of the massive amount of laws and so on that actually go into investing; the average person cannot just buy stock, they need a stock broker to actually make the deal.

-What Makes Stock Price Move Up And Down
Stock prices themselves are simply determined by two things and that is, supply and demand nothing less nothing more. People a lot of times think that how well a company doing justifies the price but this is still secondary since the only thing that can actually affect the price is supply and demand. It is true that stocks almost always go to their real intrinsic value eventually which is determined by how well the actual company is doing business wise. If a company is doing well or is a good business that will continue to do well in the future, then there is a great chance that the stock will go up in demand which causes the stock price to go up as well.

-What Are Dividends And What Do They Have To Do With The Stock Price?
In short dividends have nothing to do with the price of a stock, rather they are profits that the company is making and dividing to give to their shareholders as compensation in cash. When a company makes net income or earnings there are only two things that they can do with it. The first thing a company can do is invest the money in the company somehow which is called retaining the earnings; retained earnings are a way of a company trying to give a return to their shareholders by buying down the debt they owe, or by buying more assets to make the company potentially more money in the future and increasing its book value. Lastly companies can pay you with cash which are of course called dividends. The stock market investing 101 article here will help you understand book value better bellow.

-What Is Book Value
Book value or shareholders equity is what the shareholders actually own, and is the amount of assets that a given share controls for investors. For instance say that company had 100 shares of stocks and 100 dollars of assets, but they also owed 50 dollars in debt; their total amount of shareholders equity would be 100-50 or 50 dollars and then if you divided that by the number of shares 50/100 is 50 cents a share. So for each share that you own you are controlling 50 cents worth of equity or book value. There are two ways that the company can increase the amount of equity you have in the company, they can pay down the debt or buy more assets. If they paid the 50 dollar off completely, then the company would then have 1 dollar book value per share.

-How Do I Make Money Buying And Selling stocks
The two MAIN ways people make money investing in stocks are one you can be getting dividends from a company you own which remember are corporate profits, and two you can sell the stock for more than you paid for it which is called a capital gain. Selling a stock for a capital gain can ONLY happen when you bought the stock when it was in lower demand and sold it when it becomes in higher demand later on: the exception for this rule is short selling but we will get to that later
-To Sum It All Up
To sum it up if you are beginning to invest there are a lot of things that you will need to learn over time. This article stock market investing 101 gives a start to what you need to know, but there is a lot more that you need to study into more in depth than just what is listed in this article of course to be successful. I hope that everyone who reads this finds stock market investing 101 and investing in the stock market truly as interesting as I did when I was reading my very first article about it which was like stock market investing 101.