Stock Trading for Beginners: What Are Stocks and How Do They Work?

Getting involved in the buying and selling of stocks can be a highly lucrative investment of your time and money. But, if you’re just starting out, stock trading may feel overwhelming due to the immense amount of information needed to understand the stock market. This article is a great place to start when it comes to learning about what stocks are, how they work, and the benefits of stock trading.

What Is a Stock?

A stock is a security used to represent a person’s ownership in a share of an organization. For example, if you hold stock in Apple Inc., that means that you have a share of ownership in that company. Companies allow investors to own stock in their organizations in order to raise capital and grow their businesses. For people investing in stocks, this provides a great way to increase their wealth and beat inflation.

Companies sell stocks through the stock market exchange. Once you purchase a stock, you can then buy and sell it among other investors or stockbrokers.

How Does the Stock Market Work?

If you’re a beginner to stocks, it’s important to know how the stock market works before investing. The stock market is where companies put their stocks up for sale for investors to purchase. Within the stock market, there are several stock market exchanges in which a company can register to sell their stocks to investors. Some of the most popular stock market exchanges are the NASDAQ, the New York Stock Exchange (NYSE), the American Stock Exchange (AMEX), BATS Global Markets, and NASDAQ’s Interbank Network Electronic Transfer (INET).

Once a company lists its stocks in an exchange, investors can buy and sell its shares in the stock exchanges with other investors and brokers. Most stock exchanges operate within set hours, with common trading hours being between 9:30 a.m. and 4 p.m. During these hours, stock traders will trade stocks depending on stock price fluctuations. The more in-demand a stock is, the higher the price will be.

How Do You Make Money in Stocks?

There are two ways to make money in stocks. These include:

  • Selling stock: When the stock you purchased rises in value, you can sell the stock to make more money than you paid for it.
  • Dividends: Some companies pay out dividends to their shareholders. Dividends are monthly, quarterly, or yearly payouts made based on the worth of the company. If you hold stock in a company that pays dividends, you can make money regularly, depending on the company’s success.

What Are the Benefits of Stock Trading?

The benefits of stock trading include:

  • The opportunity to grow your wealth over a period of time.
  • Passive income made through dividend payouts.
  • Having ownership stake in an organization that gives you shareholder power.
  • The chance to diversify your wealth through the investment in various stocks and shares.
  • The ability to take advantage of a growing economy and reap the benefits of the company’s success that you hold a share in.
  • A proven way to stay ahead of inflation rates.

Investing in the stock market offers many advantages and is a great way to grow your wealth. With a little bit of work, you’ll be on your way to successful investing in stocks and shares.

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Author: Eddy

Eddy is the editorial columnist in Business Fundas, and oversees partner relationships. He posts articles of partners on various topics related to strategy, marketing, supply chain, technology management, social media, e-business, finance, economics and operations management. The articles posted are copyrighted under a Creative Commons unported license 4.0. To contact him, please direct your emails to editor.webposts@gmail.com.