Sunday, January 5, 2014

Invest in the Stock Market But First Learn the Basics

1903 stock certificate of the Baltimore and Oh...
1903 stock certificate of the Baltimore and Ohio Railroad (Photo credit: Wikipedia)
A stock is essentially a small share of a company. The percentage of ownership of a company that you get in exchange for the purchase of a stock is dependent upon many factors, including that company's industry, its stock share, and its history with business growth. Stocks are considered to be an equity investment, and whether you're looking to eventually build a significant savings out of stocks or simply have some fun, choosing to take some money and invest in the stock market can be a smart and exciting prospect. By claiming a share of a company's assets and profits, you're essentially hitching a ride along with their corporate big-time-earners, which means that the more they make, the more you make. This is one of the top five stock investment tips: buying more of a company's stock means playing more of a role in ownership, and thus earnings.

Common types of invested stocks provide shareholders -- those are the people who purchase stocks from the company -- with some voting rights, but no actual promise of profits from the company. A preferred stock, on the other hand, almost always guarantees you'll see a return from it, but you won't have voting rights within the company. If you don't mind not having a say in the direction a company goes, but you definitely want to earn a share of its profits, then a preferred stock is, without a doubt, the better choice.

Once upon a time stock shareholders had actual paper certificates verifying their ownership of stocks. These days, the purchase and trade of stocks are recorded digitally, and assuming you're using a brokerage firm to assist with the management of your stocks, they're the ones whose name will be on the stocks, even though you are the one who owns them.

Before purchasing a stock, it's important to know the basics. When ordering a stock, you can do so via a limit order, a market order, a stop order, a stop-limit order, or a trailing-stop order. Each of these types of stock ordering methods are different, but result in the same thing: obtaining one or more stocks for you. Remember, the more stocks you purchase from a company, the more ownership you have in that company. But sometimes it pays to purchase just one or two from each company, though in some instances owning multiple stocks can definitely be much more lucrative. An experienced brokerage firm can help you make the right choice in the number of stocks you buy from companies.

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