Who wouldn't want to make a little extra cash these days?
For a new investor, the stock market can feel a lot like legalized
gambling. "Ladies and gentlemen, place your bets! Randomly choose a
stock based on gut instinct and water cooler chatter! If the price of
your stock goes up -- and who knows why? -- you win! If it drops, you
lose!" Isn't that why so many people got rich during the dot-com boom --
and why so many people lost their shirts (not to mention their retirement savings) in the recent recession?
Not exactly. But unfortunately, that's how many new investors think of the stock market -- as a short-term investment vehicle that either brings huge monetary gains or devastating losses. With that attitude, the stock market is as reliable a form of investment as a game of roulette. But the more you learn about stocks, and the more you understand the true nature of stock market investment, the better and smarter you'll manage your money.
The stock market can be intimidating, but a little information can help ease your fears. Let's start with some basic definitions. A share of stock is literally a share in the ownership of a company. When you buy a share of stock, you're entitled to a small fraction of the assets and earnings of that company. Assets include everything the company owns (buildings, equipment, trademarks), and earnings are all of the money the company brings in from selling its products and services.
Why would a company want to share its assets and earnings with the general public? Because it needs the money, of course. Companies only have two ways to raise money to cover start-up costs or expand the business: It can either borrow money (a process known as debt financing) or sell stock (also known as equity financing).
With the sensex closing at 18,938 and the nifty at 5747, Indian markets closed in green for the straight 5th week. The reason for this positive drive was the government’s continued efforts to push new reforms such as in the insurance sector, pension and commodities market. The indices which briefly crossed the 19,000 and 5800 marks on Thursday fell back on Friday due to profit booking by seasoned investors and also by the panic that caused when the nifty touched the lower circuit breaker leading to a halt in trading. The Nifty dropped by over 900 points to a session low of 4,888.20, due to an erroneous order placed by Emkay securities. The accidental sharp drop halted the trade for about 15 minutes on the NSE. Trade on the BSE was normal though the Sensex was also affected by the sharp fall in Nifty prices initially. The new week will see how the market reacts to such heavy fall.
Not exactly. But unfortunately, that's how many new investors think of the stock market -- as a short-term investment vehicle that either brings huge monetary gains or devastating losses. With that attitude, the stock market is as reliable a form of investment as a game of roulette. But the more you learn about stocks, and the more you understand the true nature of stock market investment, the better and smarter you'll manage your money.
The stock market can be intimidating, but a little information can help ease your fears. Let's start with some basic definitions. A share of stock is literally a share in the ownership of a company. When you buy a share of stock, you're entitled to a small fraction of the assets and earnings of that company. Assets include everything the company owns (buildings, equipment, trademarks), and earnings are all of the money the company brings in from selling its products and services.
Why would a company want to share its assets and earnings with the general public? Because it needs the money, of course. Companies only have two ways to raise money to cover start-up costs or expand the business: It can either borrow money (a process known as debt financing) or sell stock (also known as equity financing).
Expected market outlook
SENSEX 18,938 NIFTY5747 - 8th- 12th October 2012With the sensex closing at 18,938 and the nifty at 5747, Indian markets closed in green for the straight 5th week. The reason for this positive drive was the government’s continued efforts to push new reforms such as in the insurance sector, pension and commodities market. The indices which briefly crossed the 19,000 and 5800 marks on Thursday fell back on Friday due to profit booking by seasoned investors and also by the panic that caused when the nifty touched the lower circuit breaker leading to a halt in trading. The Nifty dropped by over 900 points to a session low of 4,888.20, due to an erroneous order placed by Emkay securities. The accidental sharp drop halted the trade for about 15 minutes on the NSE. Trade on the BSE was normal though the Sensex was also affected by the sharp fall in Nifty prices initially. The new week will see how the market reacts to such heavy fall.
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