The Stock Market is often heard of in the abstract, when you hear people say things like, “Dow is down today” or “This stock is up 3 points.” Because of this ambiguity, becoming involved in the Stock Market can seem intimidating. If you’re thinking of purchasing stocks, this beginner’s guide will run you through the basics on what you need to know. These are things that you will want to know before seeking stock market advisory services.
What are Stocks?
By definition, a stock is a share that’s issued by a corporation representing a claim on its assets, usually thought of as partial ownership of that company. Companies choose to sell stock to raise capital, or money they need to run their business. It’s important to remember that a corporation, in the eyes of the law, is considered its own person, making the idea of ownership a little more complicated. When you buy stock, you are technically buying a piece of the company’s assets, but those assets can only be claimed if the corporation is dissolved.
Why Buy Stock?
Being a stockholder gives you certain rights within the corporation. These rights are:
*Voting power in meetings
*Selling your shares
By owning stock, you have a say in the direction of the company. For example, if a new member of the Board of Directors was being proposed, you would have the option to vote whether or not they were right for the company. You also have a right to dividends, or payment that the corporation sends out from their earnings.
What is the Stock Market?
The Stock Market is exactly what it sounds like. It is the place where those looking to sell stock and those looking to buy stock negotiate over the price of the stock, similar to a flea market where you would negotiate the price of goods. The corporation is not actually selling shares of its company here (except rarely), but the shareholders who own stock in the company. The process of buying or selling stock here is like that of an auction, in which someone places a bid or the seller puts an offer on the table, and the two go back and forth until a price is agreed upon.
The Stock Market is fast-paced and fascinating, but can seem overwhelming when you’re just starting out and are not sure where to begin. Learning the basics provides a good foundation, and this beginner’s guide is a great tool to begin your Stock Market journey. Use this information to begin your own research, and, before you know it, you’ll be an experienced stockholder.
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