Stocks 101: Learn Stock Market Basics

The stock market is one of the more intimidating subjects in all of personal finance. You may want to get into the stock market, but are hesitant because you don't understand the basics. Review these basics to get into the stock market with confidence.

What Is a Stock?

Owning a share of stock means that you are a partial owner of a company. The most common reason for companies putting stock for sale is to raise cash for their corporation (as opposed to borrowing the money). Owning stock is a great opportunity to capture the growth of the company, although some risk is involved.

How Much Do Stocks Cost?

Stocks are available in almost any price range. Companies come in every size and shape. They are sometimes capitalized companies worth billions or startups that have shares for sale for only a few bucks. Even with large stock prices, you can get in on the action by buying partial or fractional pieces of the stock.

How Is Owning Stock Different than Investing in a Savings Account?

Both are methods of saving and investing, but owning stock opens up the potential for explosive growth. In either case, it's a risk versus reward issue. Traditional savings accounts pose zero risk of losing money, but offer paltry interest rates. Stocks can jump up and down by many percentage points on any given day, so there is potential for a lot more earnings on your money, but there is also the potential to lose a large portion of your money if the company does not perform.

How Do You Get Started?

The best way for a beginner to get started with the stock market is to get professional advice. Ask your friends and family to refer to you a reputable stock broker--a broker is a specialist who has the ability to buy and sell stocks. Investing with a broker means you get professional advice. He or she takes into account your risk tolerance, how much you want to invest and what your financial goals are in order to select a portfolio of stocks that help you meet those needs.

Investing in the stock market is a powerful way to grow your money. Get to know the basics and jump into the stock market with confidence.

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