Understand the Basics of Purchasing Stocks Before You Invest

by Hank

Investing in stocks is a good way to become better apprised as to how you can make your money work for you. Therefore, getting a basic education in stock investment is necessary if you want to better understand what is occurring in your stock portfolio.

A stock is a share of a company that is publicly owned. Companies sell shares of stocks in order to raise the capital necessary to operate, develop products, and expand their facilities. Therefore, by owning a share of stock, you officially become a shareholder or a part owner of that company.

If you sell shares of stock lower than the purchase price, obviously you will suffer a loss. Therefore, it is important to invest in stocks that have a solid history that you can rely on to carry you through the various shifts in the economic climate.Ā  Another way you can make sure you do not suffer any unanticipated losses is to set limits with respect to the upper and lower levels of the stock’s value in which you’ve invested and to sell when your shares have reached the boundaries you’ve placed. That way, you’ll be able to minimize your losses and realize any gains. Because stock investments do not guarantee against loss, it is important to research the market and know exactly what you’re doing. Do not put your hard-earned money in jeopardy by not being properly informed as to the amount of risk.

Sometimes the value of a company’s stock will rise to a point which makes it difficult for investors to continue contributing to the fund. As a result, the company may declare a split. For example, in the case of a two-for-one split, shareholders receive a share of stock for every share they own. By issuing a split, a company can offer shares of stock at a lower price and open up demand. Consequently, your investment is worth more too.

There are several ways to invest in stocks. You can purchase stocks from a discount or full-service brokerage and obtain advice from a stockbroker on how to fund your account or you can go online. Online stock brokerages such as TradeKing provide ways for investors to easily invest in stocks. TradeKing is an excellent choice for those investors who prefer to do their trading or investing totally online and forego a broker’s recommendations. Other online stockbrokers include Charles Schwab, tradeMonster, OptionsXpress, Scottrade, E*Trade, Option House, Zecco, and ShareBuilder.

You have a lot of opportunities online and off-line when it comes to investing in stocks. The best way to approach investing in the stock market though is to do your homework and pick a mutual fund of stocks or a portfolio of individual stocks that you know you can hold onto for quite a while. Choose reliable stocks and funds that do not need constant monitoring. Do you research first.

{ 1 comment }

Investment March 16, 2010 at 8:30 pm

Your article describing why companies float shares and how they use this fund to fuel expansion and modernizaton of their facilities was good. I was never aware about this outlook. Also, your point about stocks split making stocks more tradable and valueable was unique and logical.

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