For the typical American the most common method to get rich is to invest in either real estate or stock market trading. And even though the majority of individuals have got sufficient money to get rich in stock market trading very few understand how it works; but the same people understand how to profit in real estate but very few have the money to do so.
If you are an already experienced in the stock market this particular post may be too simple for you since it's geared for those who genuinely do not understand anything at all concerning stock market trading. Let's start with the basics. What the heck is stock and in what way does one trade it? "Stock" can be described as fractional ownership in a business. What you pay for is a share of that ownership. Let's say a company divides its financial assets into 100 identical shares. If you buy 1 share you technically own 1% of the business.
This share also gives a 1% vote in the way the company does business. The price of that share will depend on the market's perception of value of that share. Since a corporate entity's actual liabilities and assets are actually fluid market price doesn't actually stand for the exact value of that share but rather what a buyer is prepared to pay for that share. When the corporation produces a profit; the profit is evenly divided up among all stock shares subtracting any money the board decides to reinvest into the corporation or keep as an asset. These are typically referred to as dividends.
Since most companies issue millions of shares of stock, your actual vote is actually pretty meaningless given that a core group will keep enough of the business's stock in their own personal control so they can have a majority vote on all company decisions. The actual reason that you want to own stock would be to collect those dividends or to sell off your shares in the event the price of the shares rise, therefore generating a profit.
Virtually all stock market trading is performed by means of official stock exchanges. The actual selling or buying is carried out through stock brokers who are allowed to trade in the exchanges. Every time you buy or sell off stock shares these brokers receive a percentage, a set fee, or possibly a combination or the two. This is where the smaller investor is at a disadvantage over a larger one. Let's say you wish to personally own 1000 shares of XYZ, but you can only find the funds to purchase 200 shares at any given time. You have two possibilities: either make 5 individual purchases and pay the fee each time or save up enough to purchase all 1000 shares and hope the value doesn't rise too much while waiting.
Because so many large corporation shares can cost $30 or more it may well make more sense for the smaller investor to buy less expensive shares which often have a more substantial price increase over time. This helps counterbalance the expense of selling and buying. Imagine if you buy 1000 shares of a stock that costs $10 a share. In the event the value increases $2.00 you have made a 20% financial gain minus your brokerage fees if you sell. It cost you $10,000 dollars and you sold for $12,000 minus fees. Pretty good.
You might have purchased double the shares of another investment at only $5.00 a share. If that stock goes up $2.00 you would have potentially made 40% or $4,000 profit on the same $10,000 purchase. While the probability of a $5.00 share increasing $2.00 a share is not as likely, the possible pay back is larger. And a small investor with minimal finances to spend will often experience even bigger gains by trading what is generally known as penny stocks; those equities that trade for under a dollar. These securities can sometimes double or triple in value in a really short period of time.
The problem with investing in penny stocks is obviously attempting to choose winners and losers. A large number of smaller businesses haven't any track record and so the novice trader might not be in a position to tell the difference between a low priced investment that may be about to take off or one that is low because the stock shares are actually not worth anything now nor will they be in the long run. For this reason a small time investor shouldn't be trading in penny stocks without benefiting from substantial market analysis to back him up. The truth is no stock market trading should be done without it.
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To learn more about stock market trading visit ." target="_blank">http://www.stockmarkettradingx.com .
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