NagbeFinancial3

Thousands of websites have subjects about the stock market, many of them technical and tedious. Before I decided to introduce others to the stock market, I was amazed that so many boring websites had been setup on such a fascinating market place. Just like most of you, I had my doubts about the stock market. This is why I am so determined to make available to my fellow Liberians and friends alike as many information about the stock market in an easy-to-understand and informative way as they go about considering this new way of investing for the future.

You may be surprised, but the stock market is not as difficult to understand as you might think: By the time you finish reading this section, you should have enough knowledge of the market to allow you to sail through the rest of the site. The trick is to learn about the stock market in small steps, which is exactly how I intend to present the information to you from time to time.

Think of the stock market as a huge auction or swap meet (some might call it a flea market) where people buy and sell pieces of paper called stock. On one side, you have the owners of corporations who are looking for a convenient way to raise money so that they can hire more employees, build more factories or offices, and upgrade their equipment. In fact, this is the sole reason why I am introducing the stock market to Liberians - to make them work in partnership with one another to create jobs for their children and future generation. The way they are going to raise money is by issuing shares of stock in their corporation. On the other side, you will have people like you and me who will buy shares of stock in these corporations. The place where we will all meet, the buyers and sellers, is the Monrovia Stock Exchange market.

We're not talking about livestock! Actually, the word stock originally did come from the word livestock. Instead of trading cows and sheep, however, we trade pieces of paper that represent ownership - share - in a corporation. You may also hear people refer to stocks as equities or securities. Most people just call them stocks, which means supply. (After all, the entire stock market is based on the economic theory of supply and demand.)

When you buy shares of stock in a corporation, you are commonly referred to as an investor or a shareholder. When you own a share of stock, you are sharing in the success of the business or company, and you actually become a part owner of the corporation. When you buy a stock, you get one vote for each share of stock you own. The more shares you own, there, the more of the corporation you control. Most shareholders own a tiny sliver f the corporation, with little control over how the corporation is run and no ability to boss anyone in the corporation around. You would have to own millions of shares of stock to become a primary owner of a corporation whose stock is publicly traded.
In summary, a corporation issues shares of stock so that it can attract money. Investors like you and me will be willing to buy stock in a corporation in order to receive the opportunity to sell the stock at a higher price. If the corporation does well, the stock you will probably go up in price, and you will make money. If the corporation does poorly or there's serious political uncertainties in the horizon, the stock we own will probably go down in price, and we'll lose money (if you decide to sell, that is).

Stock certificates are written proof that you have invested in the corporation. (Some people don't realize that you invest in companies, not stocks.) Although some people ask for the stock certificates so that they can keep them in a safe place, most people let a brokerage firm hold their stock certificates. It is a lot easier that way. To be technical, there are actually two kinds of stock, common and preferred. Here, we will always be talking about common stock, because that is the only type that most corporations will issue to investors. Remember, not all companies issue stock. A company has to be what is called a corporation, a legally defined term. Most of the large companies you have heard of are corporations, and, yes, their stocks are all traded in the stock market. I'm talking about corporations like Microsoft, IBM, Disney, General Motors, General Electric, and McDonald's.

The stock market is all about making money. Quite simply, if you buy stock in a corporation that is doing well and making profits, then the stock you own should go up in price. (By the way, the profits you make from a stock are called capital gains, which are the difference between what you paid for a stock and what you sold it for. If you lose money, it is called a capital loss.)

You make money in the stock market by buying a stock at one price and selling it at a higher price. It's that simple. There is no guarantee, of course, that you'll make money. Even the stocks of good corporations can sometimes go down. If you buy stocks in corporations that do well, you should be rewarded with a higher stock price. It doesn't always work out that way, but that is the risk you take when you participate in the market.

Professional traders use other people's money (and sometimes their own) to make investments or trades on behalf of clients. Professionals include individuals who work for Wall Street brokerages and stock exchanges, but they also include institutional traders like pensions funds, banks, and mutual funds companies.

There is no doubt that institutional investors that have access to millions of dollars influence not only individual stocks but the entire market. Some of these institutions have set up computer programs that automatically buy or sell stocks when certain prices have been reached. (On days when the market is up or down hundreds of points, the stock exchanges limit how much institutional investors can buy r sell.)

If you want to be a professional Wall Street trader, you can also apply to become a member of one of the exchanges. At current prices, it will cost you several million dollars to buy a seat on the NYSE, and all you get for this is the freedom to trade stocks directly on the exchange floor. (For that kind of money, you'd think they'd let you play gold and swim! For a few million dollars less, you can trade directly from the comfort of your own home.) some people with seats rent them out to professional traders and thus bring in extra income.

In brief, Wall Street has several ways to keep track of the market. One f the easiest ways to find out how the market is performing each day is to look at a newspaper, television, or the internet. Typically, people look at the Dow Jones Industrial Average (DJIA), the most popular method of determining whether the market is up or down for the day. For more information on how DJIA came about please go and read that section for more details.