Stock Market Basics

Stock markets represent and portray the commercial and
economical strength of a country. The economy of a country
relies on the stock market to a great extent, since they trade
in the stocks of major companies. These markets are the source
of capitalism in the United States. They play an important role
by raising funds for companies. Being a part of a stock exchange
may seem complex to many, but you can be a part of any popular
stock exchange, either with the help of a brokerage account
that can be opened online, or by interacting directly with the
exchange.

A stock market is a place where people who want to earn money
through investment, and companies who can provide those
investment opportunities, come together. The trading and
investing of stocks takes place in this market. Companies need
funds and in order to raise funds, they issue stocks in the
form of shares in which you invest, to earn money. If the
company earns profit, then you as a stockholder of that company
will also get a share in that profit.

You can gain a lot on the selling floor of a stock market. It
is necessary, however, for you to understand the basics of a
stock market, what its roles are, and how it works. For this, a
proper study of all the possible market moves is essential. This
needs constant appraisal, as the market moves very fast, and
there are many ups and downs involved.

Stock markets are fraught with risk. Therefore, be it trading
or investing, you need to proceed with caution. It is advisable
to analyze a company's profits and cash flow, the services it
offers and the profit distribution pattern it follows, before
investing in its stocks. If you are confident that the shares
are commercially viable, you can go ahead and make an
investment.
.
Beside the profit incurred through the sale and purchase of
stocks, you can also get the benefit of dividends that
profitable companies offer. As an investor, you ought to know
that blue chip stocks, income stocks, defensive stocks and
growth stocks are several groups under which the future shares
of companies are divided.

Big companies that pay dividends without fail, and have a
record of growth in profit, have their shares referred to as
blue chips. You can also invest in income stocks because the
companies that issue these stocks pay high dividends, and have
a stable earning in the market. Growth stocks grow very fast,
but may fetch you nil or minimal dividends. In order to
minimize your risk you can invest in defensive stocks as their
value remains constant even if the market falls.

Companies can also issue their shares abroad with the help of
banks. If you are planning on investing in stocks then try to
invest in companies that offer dividends along with discounts.
You can do the purchasing through the brokerage, or dividends,
or a direct investment plan. Since a lot of people buy shares
and stocks there is a cycle of supply and demand. Depending on
this cycle, various fluctuations take place in the stock
market. So, try to immunize yourself from these fluctuations by
investing wisely.

The stock market not only provides you, as a trader or
investor, an opportunity to purchase or sell shares or stocks,
but also plays an important role in maintaining the cash flow
in the economy of a country. If you are interested in making
money in stocks, then it is recommended you learn the basics of
stock markets before leaping in.


About The Author: Joe Kenny writes for the UK personal finance
sites http://www.ukpersonalloanstore.co.uk and also
http://www.cardguide.co.uk

Please use the HTML version of this article at:
http://www.isnare.com/html.php?aid=100432