First Encounters With Stock Market Trading – Understanding the Basics

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So What is a Stock?

Basically a stock is part of a company’s assets which they sell to raise money to progress and expand the business. When you buy a stock, you get a paper certificate of which is your proof that you are the owner of a part of the company. The value of the stock can go up and down, and you must be careful not to invest in a failing company.

Which Stocks are Best for me to Invest In?

By far, ‘blue chip’ companies are the very most safe and best for you to buy stocks in. Examples of such companies would be Google or Facebook. Being a ‘blue chip’ business simply means that they are incredibly stable and show no signs of going bust any time in the near future. Which means you’re almost guaranteed to make money. However, it will cost you more to buy such stocks, and they can also limit the number of stocks they sell each year.

So How Do I Know if a Company Actually Sells Stocks and Shares?

For the company to be registered with the major stock exchanges, they will have what is known as a ‘ticker symbol’. This has become the standard for identifying the thousands of businesses that sell stocks. Years ago, before computerised trading became the norm, ‘ticker tape’ was used to send company and stock price info over telegraph lines. So the term ‘ticker symbol’ was carried over to modern electronic means of trading. It’s simply an abbreviation of the company. Here’s some of today’s ticker symbols:

GOOG – Google

MSFT – Microsoft

WMT – Walmart

If a company doesn’t have one, do not part with your money – it’s likely to be a scam or ‘fly-by-night’ operation that will do a runner.

I Don’t Have a Lot of Money to Invest – Is there a Cheaper Option than Blue Chip Stocks?

Yes there is. Known as ‘penny stocks’, these are sold by substantially smaller businesses, and mainly sold at less than a dollar each, although some go as high as five dollars. Although quite cheap to buy, the risk factor is quite high here. Sometimes when a business is on the road to bankruptcy, they will sell shares at knock down prices in a last chance saloon attempt to repair the business. They’d use your funds for a final attempt to save the company.

On the other hand, many new and ‘up n’ coming’ businesses will sell penny shares to raise funds to market their new product or service, but you can end up losing your shirt if it doesn’t work out for them. So always do your homework before parting with any money. Scourge the internet for information on the company and their products. And check out ‘Google Trends’ for products and trends that have an increasing number of searches.

So if your investment funds are limited, penny stock investing can be a good way to learn the basics of investing. You can get penny stocks for as little as one cent each! That’s why they’re called so. I suggest you experiment with them first. Just risk about twenty dollars or so on each company and see how it goes and test the whole thing out. Or you can even paper trade at first, risking nothing.

That concludes our discussion on stock investing for newcomers. Remember that buying stocks means you are actually are a part owner of the business. So invest wisely and get a good education of stock market trading before taking the plunge and hopefully you will succeed.

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Source by Neil Harland