9) Stocks Basics: Conclusion

by · August 25, 2010

You can make a lot of money investing in stocks or trading in the stock market, but it is not something for the new investors.  Care must be taken when it comes to stock investments.  The investor must have a solid understanding of stocks and how they trade in the market or risk losing money in a volatile type of investment.

Let’s review what we’ve learned in this tutorial:

  • Having stock in a company means you are an owner. How many shares of stock you have determines the extent of that ownership. As part owner, you receive dividends and have voting rights.
  • A stock represents equity, while a bonds is a debt. Bonds are low-risk investment vehicles with guaranteed returns, while stocks involves more risk. This is why stocks have a higher rate of return compared to bonds.
  • In investing, the riskier the investment the bigger the chance of making more money. Investing in stocks can make you lots of money if you invest in the right company. However, you can lose all of it too.
  • There are two main types of stocks: common and preferred. Stocks can be further classified into different classes depending on the company.
  • The stock market is a place where people go to trade stocks. Two of the most important stock exchanges in the United States are the NYSE and Nasdaq.
  • Purchase of stocks are commonly done through a brokerage. You can also get a dividend reinvestment plan (DRIP).
  • Stocks are volatile. Prices change according to supply and demand. Many people have different opinions on why stock prices move the way they do. One of the most important factors that influence prices is earnings.
  • Learning how to read stock tables or a stock quote is a must if you are planning to be a serious investor in stocks.  It is not hard to read a stock quote once you know what the different terms and symbols stand for.
  • Always remember the old stock market saying: “Bulls make money, bears make money, but pigs get slaughtered!”. This will perhaps save you many times from losing on your investment.