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Some Basic Information About The Stock Market
By John | September 3, 2010
Investing into the stock market can be a great plan of action.So, what exactly are they?Here is a small stock market for beginners tutorial for people who want to start learning about stocks.
Stocks are just pieces of the ownership of a specific company. For instance if you buy 1 share of stock in company XYZ then you own a piece of the company.If there are 10 million shares of stock in that company and you own 1 share then you are 1/10,000,000 owner of the company.
Over time stocks move up and down based on how fast the company grows and how much supply and demand there is for the company.If the company is fundamentally strong and growing then there will be more and more demand to invest into it and this demand will raise the price of the stock.
There is also a second way that stocks make money for their investors. Dividend paying stocks are stocks which pay you a small amount of the company’s earnings. These earnings can make you some extra money on the side and as the company grows and starts to prosper their dividends will continue to increase meaning more and more cash flow for you.
So, how do you find strong stocks that are likely to grow over time?Well there really are a lot of great strategies out there, however the most powerful one is probably value investing.
This involves buying stocks in companies that are already well established, but their stock is just not at a fair price. In other words their stock is undervalued.
Value investors will use ratios such as the Price to Earnings Ratio and the Price to Book Ratio in order to try to match up how much the company is actually worth per share and how much those shares are going for.
Also looking at how much trust you have in a company is important too.If you can’t see the company being around for the next 5 or 10 years then buying it for a long term investment is probably not a very good idea.On the other hand if it does have a large growth potential then the opposite is true.
When it comes down to it you have to be the one to decide if it is worth getting into or not.However if you take the time to do your research right then you will be setting yourself up for long term success.
Topics: Stocks |
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