The first lesson regarding the stock market for newbies has to do with its conception. The old rule concerning the stock market that states you must buy low and sell high still stands true today. This is a lot harder then it sounds though because knowing when a stock will be increasing in value is a whole new ball game for most people as this is known as speculation.
You have your choices between the two major stock exchanges which are known as the New York Stock Exchange or simply as the NYSE or you can use the NADAQ. While there are also many other exchanges in the US alone these are the two most important and this is also where all the major corporations come to play.
Purchasing a share of stock means that you are in fact buying a portion of a company and you do not even have to do anything regarding its day to day operations. Your investment is directly tied to the company's ability to profit. When the company profits, demand for its stock increases and therefore so does your investment.
The second lesson regarding the stock market for newbies revolves around the types of stocks that are available. You have two types of main stocks which are the preferred and the common shares. These stock's names alone should be self-explanatory. The common stocks are the most common, and because they are more plentiful they are also a lot cheaper. On the other hand a preferred stock is more valuable. If it is at all possible, you should make every attempt that you can to have some of each of the share types.
When a dividend is released by a company who has reported profits, it is those who own preferred shares that get paid. As long as the company stays in business and continues to be profitable, you will make money simply through holding on to the stock without having to buy and sell for short term gains. If the company goes under, it is also those who own preferred shares of stock that will be paid first and then if there is any money left to go around, the common shares may get some.
The value of a share of stock is dependant on the laws of supply and demand. If there is a high demand for a company's stocks then the value of each share will increase. On the other hand if there is no demand at all for ownership in the company the value of the stocks will go down. These ups and downs are what speculators play with when they purchase stocks at a low price right before the value goes up.
Visit the authors website Stock Market Information For Dummies for articles, tips and advice about developing your own stock market investing strategies, and learn more about stock market investment software.View all articles by Ray Baker
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