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A deeper look at the basic principles of investing

A deeper look at the basic principles of investing, and what you need to look for. Every day, the words NASDAQ, New York Stock Exchange, and Wall Street, are discussed on the television and Internet.

One principle of the stock market is stock. This is simply, a partial ownership in a corporation's assets and profits. Typically the owners of the stock, called stockholders, are given dividends or payment from the profits each year. A dividend on a share of stock represents that payment to the stockholder.

Some large companies may have millions of shares of stock. So the profit is sent to all of the stockholders according to the percent of stock they own.Capitalization is a way of showing the value of the corporation. Investors need to know the value of their stocks. So capitalization is the product of the number of shares multiplied by the price of each share.

Therefore if there are 10,000 shares of stock, and each share is worth $7.50, then its value is $75,000.00.The corporation is not sold, but the profits would be paid to the shareholders based on how many shares they own.If 20 people owned the 10,000 shares of stock, then each one of them would receive 5 percent (5%) of the dividends if each one had the same amount of stock. If one person owned 50 percent (50%), then that stockholder would receive half of the profits being paid.

What is the stock exchange?

The stock exchange is like a farm market, or fish market on the short of the ocean, etc. This is where sellers and make known they have stock for sale, and buyers can read about the stock, and purchase what they would like to get.

Stocks can be sold in a publicly traded company, which is a corporation, which sells stock to outsiders, not just employees, or family members or partners or the board of directors.

Sometimes this stock is sold all over the world, and a meeting place called a stock exchange, facilitates that sale. The New York Stock Exchange (NYSE) is that kind of a market.At the NYSE, a buyer can sell or trade stocks of companies all over the USA, for example. This is a very large room with many desks and personnel, tickertape machines, large display screens on the walls, so a buyer can see the current value of all stocks and what's offered for sale, and what has sold.

What is a stockbroker?

A seller or buyer does not have to go to New York to buy or sell. They can call a stockbroker who does business on the NYSE. Their broker will go to the stock exchange and buy or sell for you, and receive a commission for doing that.

Because the NYSE has brokers and stocks all less under one roof, the price of a current stock is available to everyone, all over the world, instantly. This way an investor can see the movement of the stock moving up or down or how the prices fluctuate.

Why does stock value fluctuate?

Several bits of news effect the fluctuation of a stock. A news release, a report on the media, national economic news on the economy, all can create fluctuation. The buyers receive the news and choose to buy more of the same stock. Or they can choose to sell their stock if they believe it's a sound investment.

One firm bought Coca Cola stocks years ago, and has seen their purchase price spiral very high. The return on their investment, or the profit, has been very high. Many stocks go up on a product in high demand. On the other hand, when the news speaks of a disease caused by mosquito bites, the stock of a manufacturer of bug spray might have a quick rise, and then settle down again a month or two (2) later. This is the basis for fluctuation.

Also stocks fall in value. Bad news, death of the owner, a slump in the economy, a hurricane, terrorist bombings, etc, all affect the downward drop in stock values. One major mortgage and insurance company, with many mortgages in Florida, got right out of the market when a hurricane hit in Florida. (Getting out of the market is a way of ceasing to do business in that particular area.)

Buyers belief that a company is a good place to invest their money, create a greater value as more times the stock sells for a larger amount. If buyers loose faith in a company and sell out fast, this can cause a drop.

An example could be the silver prices going up dramatically when 1 company purchased a thousand bars of silver. Supply and demand is major factors in the price of stock. The price of stock also shows the dividend that the corporation pays from the company's profits as well as the projected earnings of a company.

A good example of this last thought is the Tickle Me Elmo that was the rage around 2003-2016 by Christmas. Again, there is plenty of supply and demand

As you take a deeper look at these basic principles of investing, you will find that there is a great deal of information out there. It is often time a good idea to get the advice of a financial advisor, before you take any major changed in your financial future.


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