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Tuesday, April 3, 2007Posts in the [Stock Made Simple] series:
I learnt from Adam’s Secrets Of Self-made Millionaires book how important investing is to our personal finance. No matter who we’re, what we’re working at, if we have some money to “invest in the bank”, we should consider investing in the stock market for better return. Some say “there will be higher risk”. Yes, there is very high risk if we don’t know what to do. At the same time, when you know what you’re doing, the risk is much lower and the profit can be amazing. If you’re like me, don’t know anything about stock market yet, don’t worry, and…
Welcome to Stock Made Simple series. If you’re just getting started in the stock market, this series is perfect for you because I’m sharing what I know as a beginner. Though I aim to become a professional trader very soon, at this point of time, I’m not. Therefore, I’ll write this series with a very simple language that anyone with no prior knowledge can understand. If you’re a professional trader, you may not benefit much from this series. However, you can always give me your comments so that we can have better contents here. I will post new articles for this series often, so be sure and check back regularly for more informative but simple lesson about stock.
Let’s start with a simple concept first: “What is a stock?”
Stocks are pieces of paper that represent ownership in a corporation. Some people refer to stocks as equities or securities. When you buy stocks of a corporation, you’ll be come an investor or a shareholder. When you own a stock, you own a part of the corporation. You get one vote for each stock you own. The more stocks you own, the more of the corporation you control. Most shareholders own a tiny part of the corporation. They have little control over how the corporation is run and no ability to boss anyone in the corporation around. We must own millions of stocks to become a primary owner of a corporation whose stocks is publicly traded.
The purpose of corporate stocks are to raise money. Investors are willing to buy stocks in a corporation in order to have the opportunity to sell them at a higher price. If the corporation does well, the stock we own will probably go up in price, and we’ll make money (if we sell). If the corporation does poorly, the stock we own will probably go down in price, and you’ll lose money (if you sell).
The rule of the game is very simple, buy at lower price and sell at higher price.
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