Beginner’s Guide to the Stock Market

Stock markets can return a huge amount of money is short time. Advertisements from the vendors who provide stock trading facilities might help some time. But, they shouldn’t be followed blindly. An unwise investment can easily make a millionaire to a poor man. Stock market can produce many adverse effects. Many beginners are vulnerable to lose more amount of money. A clear understanding about the stock market should be made before starting to invest. There are some of the basic terms, which a beginner should know before starting to trade. Here are some of the terms, which help beginners:

What is a stock market?

In simple terms stock market means a supply and demand system. The company for starting a business can raise funds. The company issues shares and people contribute to the capital by buying the shares. Stock market can be termed as a huge superstore where the only activity that takes place is trading. Stock trading doesn’t require a huge some of money for beginners. Beginners can start by investing a small amount and once they get used to trading, large sum of money can be invested. The cash flow in stock is of two types. First, the shareholders can get a percentage of the profit as a dividend. The other way is that the shares can be sold to other persons with the current market price. Buying the share and selling it after a long time can actually yield more profit.

How to buy shares:

Shares can be bought and sold only through stock exchanges. Stock exchanges act as mediator between the companies the shareholders. Stock exchanges maintain information like profit, share price and other related information. Share brokers helps in buying shares. The share broker in turn contacts the stock exchange and buys the share for the trader. Traditionally, traders would visit the broker agencies. But, the trading have improved a lot that trader can place orders for buying and selling the shares through Internet itself. A demat account would be required for availing this service. Once a demat account is provided the trader can login with the username and password provided and start trading.

Is stock market a good investment?

Stock market remains fluctuating. It can rise up and lower down in minutes. Long-term investments can really yield a large amount of money. Buying and selling in short time can also yield good profit, but it is too risky. So, wise traders would handle both long term and short-term returns.

Recommended ways to invest:

Trending the market is a key thing, which differentiates between a normal and a professional trader. It is a key factor in investing. Trader should foresee the share price and should track the market changes very closely. Also, no investment should made depending only on one share. It should be diversified. Investing in a single company can return either a big loss or big profit. Good profit can be made out of diversified investments.