Stock Market Investment Guide
Stock market investment guide! Stocks, shares, Nasdaq, bull markets, the dow jones - finally you don't have to feel like a twit when others discuss them. Here's the lowdown . . .
The stock market! A wondrous place where fortunes are made and dreams are realized. For many of us, however, the stock market is a place of complicated confusion – as foreign as our kid’s mathematics homework. If only we could unlock the mystery of it all – then, maybe we could enjoy some of the rewards that other more knowledgeable individuals seem to be taking in. Here, then, are the 4 basic steps to becoming a stock market player:
(1) Picking Stocks: The key to profitable investing is to pick good stocks. This involves, firstly, identifying stocks from public companies that you are interested in. Think of the things that crop up in your daily life; soft drinks, shoes, clothes, computers, cars, etc. Pick out some of the manufacturers of those products and set about getting information on those companies. Narrow down your stock selections to the companies in the top 20 industries as identified in such reference works as Value Line Investment Survey which is available at most Public Libraries. Screen those companies with safety ranks of ‘1’, ‘2’ or ‘3’ and that have a projected sales and earnings growth of 15 % or more over the next five years.
(2) Buying stocks: There are 3 ways to buy stocks from the stock exchange;
(a) Market Order – where you buy stocks at the current price. This is the most common method.
(b) Limit Order – where you buy a stock when it reaches a target price. This is normally below the current market price.
(c) Stop Order – where you buy a stock when it rises to a target price above the current price. This is used to protect gains in a short stock position.
(3) Monitoring stocks: There are various on line tools to help you track your stock’s current price and to calculate gains and losses. Sites like CNN fn, MSNBC and USA Today will help you to monitor your stock investments.
(4) Selling stocks: There are 3 methods of selling stocks in the market;
(a) Market Order – where you sell a stock at the current market price.
(b) Limit Order – Where you sell a stock when it reaches a target price which is normally higher than the current price.
(c) Stop Order – where you sell a stock when it declines to a target price. This is to protect the gains on a stock that has considerable gains.
The above are the mechanics of buying and selling stocks. To make money, however, it is vital to make a careful, ongoing study of the market and, most importantly, to be prepared to be in it for the long haul. Here are some terms that you may encounter along the way:
NASDAQ – a computerized system to facilitate trading by providing brokers with current bid and ask price quotes on over the counter stocks and some listed stocks.
Bull Market – a prolonged period of rising prices, usually by 20 % or more.
Bear Market – a prolonged period of falling prices.
Buyer’s Market – a market that has more sellers than buyers.
Share – a certificate representing one unit of ownership in a corporation, mutual fund or limited partnership.
Dow Jones Industrial Average (DJIA) – the most widely used indicator of the overall condition of the stock market, a price weighted average of 30 actively traded blue chip NYSE stocks.