A Simple Guide To Stock Market Basics

The stock market presents an opportunity for you to purchase shares of ownership in any public company. Yes, that's right — just by buying even one share of stock in McDonald's, you have an ownership stake in the company. If the value of McDonald's stock goes up, you make a profit. If it goes down, then you suffer a loss. In this article, I will give you some stock market basics.

As an owner of the company, you have certain claims on how the company operates. This doesn't mean you can call the day-to-day affairs. However, each share allows you one vote to elect the Board of Directors for the company at annual meetings, which act in the company's best interest. For example, if the company hasn't been increasing in value, or is under mismanagement, the Board of Directors has the ability to remove management.

Stocks are typically traded on stock exchanges, where buyers and sellers meet and decided on a fair price for each share. There are two types of stock exchanges — a trading floor, or then electronic exchange. For example, the New York Stock Exchange is done on a trading floor, whereas the NASDAQ is done electronically through a network of computers. This is the stock market basics, regarding exchanges.

If you wish to buy or sell shares of stock, the most common method of doing so is through a broker. This can be done either in person, or electronically. A broker has the ability to contact agents, who will purchase or sell shares on your behalf on the trading floor, or do so from a computer in electronic stock markets.

There are two type or brokers you can use — full-service brokers, or discount brokers. Full-service brokerages offer you advice on what stocks investing, and help you manage your account. Of course, these services are not free, and in some cases can be expensive.

Discount brokers, on the other hand, offer very little advice, but allow you to place orders of buying and selling of different stocks. If you've done your homework, and feel safe about your ability to manage your own account, then this may be a better option for you.

The price of a stock is controlled by supply and demand. The more something is demanded, and the harder it is to meet that demand, the higher the price will rise, at least theoretically. At the same time, if there is too much supply, and not enough demand for it, the price will fall.

In conclusion, I have given you some stock market basics to help you if you are deciding to invest in the stock market.

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