Finance - Understanding The Stock Market For Beginners
Lesson 1: Stocks Basics
Stocks Basics
Making informed purchases will limit the liability and losses percentages considerably thus creating a better revenue earning platform that does not require much effort on the part of the investor.
Investing on stock based on hearsay information is not the way to invest in this particular platform as the losses can be considerable. The danger of making an uninformed purchase can be avoided with a little in depth study on the company’s portfolio.
Engaging the expertise of those in the field is also encouraged as these individuals are highly trained and knowledgeable in market movements and its corresponding impacts.
There are also several different types on stock investments that and individual can involved in and some of these may include common stock and preferred stocks.
These can then be broken down even further into different classes of stocks which are differentiated by the voting rights the share type holds. This is to ensure the operating power of the company still stays within the intended group.
Lesson 2: Shares Basics
Shares Basics
Smaller businesses would not need to go through the complicated processes that usually involve extensive legal ramifications, but instead opt to procure investment on a much smaller scale, such as from family members, friends and other interested investors. These investments are usually kept to a minimum to ensure the actual dictating power will remain largely with the intended original controlling party.
For the bigger companies shares can be offered by approaching business angel investors and venture capital investing firms. These entities are always on the lookout for good investment opportunities but they don’t necessarily want to actually get involved in an already successful set up. Therefore just being a shareholder that collects on the profits or dividends in enough an investment decision to make. For the actual business owner this can be a rather ideal arrangement as outside interferences can often cause the connecting elements to the business to become confused, with the implementation of conflicting and varied new inclusions in the business engine.
The advantage of this type of procurement capital style is that there is no need to pay off debts caused by borrowings and instead it is simply the exercise of dividing up the profits according to the shareholder’s investing percentages. For some this is considered an easier option compared to the others available in the market.
Lesson 3: The Variable Differences Between Stocks And Shares
The Differences
Stocks are primary investment style elements that are commonly paid up in full. As for the acquiring of shares, payments can be either in full or staggered. It would all depend on the agreements drawn up by the owner of the business who is extending the participating platform.
Companies that are incorporated are privy to the share issuing style of investments; however this cannot be extended to those wanting to invest as stocks as stock options cannot be issued under these same circumstances.
Therefore only listed companies with strong portfolios can apply to have their company offer stocks as investment opportunities for interested parties.
Stocks have the convenience of transferable facilities that don’t require long waiting periods or periods where legal implications have to be sorted out first. With stocks the transferring methods are clear and quick and can be done in fractional parts.
When it come to the shares style of investment the same cannot be applied as firstly shares cannot the divided below the face value of each share nor can the transactions be done conveniently and often.
The legal implications that the transferring of shares constitutes is not as easy or as convenient as that of stocks which can be done
registered or unregistered through a simple delivery method. Shares however have to be always registered and are not transferable by just a simple delivery.
All shares have a serial number which depicts the legality of the document. This however does not apply to stocks which are unnumbered serially or otherwise.
Lesson 4: Trading Fundamentals Of The Stock Market
Trading
These may come from proper assessments and performance valuations which the informed investor will insist of being privy too, before actually making the commitment to invest in the said stocks.
Technical analysis usually does not yield the same amount of interest from serious investors, as the price fluctuations usually don’t honestly depict the company’s capabilities or merits.
The following are some of the fundamental elements that would contribute to investors making bids on the stock market exchange regularly and with impact:
The cash flow of a company being listed on the stock exchange is usually able to meet the most impressive basic requirements before it can be considered suitable for listing.
Failing to accomplish this minimum requirement will result in the particular stock options listing being rejected.
Impressive returns on assets is also another factor that will ensure the stock attracts the attention of those interested investors. Without these returns well documented and visible the business entity would not be able to have the required fundamental placings that are usually sought by investors.
Good fundamentals would have a solid profit history where the retention of such profits fuel further funding for growth possibilities. Investing in such strong entities will give the investor the confidence needed to make the commitment.
This would also encompass the soundness of the capital management of the company where the maximization of the earning capacity is evident.
Lesson 5 : Stock Price Fluctuations And Share Price Determination
The Changes
Basically, the value of the company is reflected in the market capitalization which is dictated to by the stock price being multiplied by the number of shares outstanding. Therefore trading the stocks at a lower value but flooding the market will more stocks to be bought will create the scenario whereby the actual price of the stock reflects the expected growth the investors are looking to for the future.
Share prices on the other hand are in theory supposed to be based on more informed buying trends whereby the fundamentals are carefully studied and then decisions are made on when to buy and sell the said shares. However this is only in theory as there is also the “herd sentiment” where movement in the shares is often dictated to by the masses either pushing the price upwards or downward
Most serious investors will buy into a share based on the strengths it is portrayed to have as it presents a more stable investing option. However, this does not mean that the serious investor does not partake in the buying and selling exercise just as the volatility dictates. It would however means that when there is an opportunity to buy at low prices the investor would take the opportunity to buy more stock in the particular company and then sell when the price goes up to make the “quick” cash to then go back and reinvest when the price drops again.
Lesson 6: The Advantages Of Using Stocks And Shares
The Advantages
The most prominent reason for investing in stocks and share is for the primary reason of quick and large returns. For some this can be done within a phenomenally short space of time while for the more serious investor who is willing to wait the profits can be equally delightful.
The accessibility of such an investing platform also makes this tools an attractive money making venture. Having such accessibility helps to ensure that trading on these stocks and shares have very little limitations and constraints attached to the process.
The variety of stocks and shares available would ensure the investor has a wide and varied choice to choose from, thus anyone with sufficient capital can afford to make such investments without any hassle at all.
The liquidity factor also plays quite an attractive option to this sort of investment. Due to the greater level of liquidity the cash conversions are basically perpetually available wherever there is a market interest for buying and selling. This is comparatively the better option to invest in for quick cash returns than other securities. However it should also be noted that the risks involved are also equally high.
Lesson 7: When To Get Out Of The Market
When It’s Time To Leave
Although in theory the idea behind buying into a particular stock or share is supposed to be based on the fundamentals of the company offering such opportunities, this is often not the reason for a buying spree. However being able to invest in a company with strong fundamentals is an advantage to be tapped into. Reason being that no matter how the stock prices fluctuates the strength of the company will carry the investment comfortably. The strong fundamentals will also create the periodical movements in the pricing that will allow the investor to sell for quick profits. This is where the liquidation allows the same shares or stocks to be reinvested in.
Getting out when there is an economic turmoil maybe what some investors resort to doing. The same sentiments are also evident when there is political turmoil too. However for the investor with “holding” power there is the option of being comfortable enough financially to weather the storm and stay in the game. For most however the quick liquidation option is a better way to cut losses or while there is still some opportunity to make a little profits than to end up with stock that are so badly devalued that it would take a long time to reach its peak again.
At the end of the day the investor needs to weigh all options and question the level of risks involved against his or her willingness to take such risks for profits.
Conclusion
Stock markets present a very attractive investment platform for those interested in long term and short term investments. However most people do not really know how and when to get out of the stock market game, and this often leads to severely compromised liquidity for the investor.