Learning the Basics of Trading: Buying Stocks 101
Do you like tutorials? Have you ever wondered if there was a right way to do something and actually researched the correct steps in accomplishing it? If your answer is yes, I bet you will be interested in this Buying Stocks 101. We have compiled a short discourse about the need-to-know concepts and strategies of stock market investments.
Study Basic Stock Market Vocabulary
Let us make an analogy. Imagine you have just migrated to a new country, one that speaks a primary language other than English. What should you do to adjust? You wanted to make friends with your neighbors and colleagues so you try to learn their language. The best way to start familiarizing yourself with a new environment is to communicate and interact with them. Being able to use and understand a certain language enables a newcomer to adjust better and become more connected to the new atmosphere.
The same goes for the stock market. You begin by learning its basic terminologies and then go forward from there to learn the more difficult concepts. To give you a good background, we will define the basic terms you are sure to encounter in the initial phases of stocks investment.
A stock is a security that denotes ownership of a portion of a corporation’s properties and its profits. You can also call it “share” or “equity.” People who own stocks are “stockholders” or “shareholders.”
Two kinds of stocks:
- Preferred – carries no voting rights in the company’s policy and operation, but are priority shares in terms of paying out the dividends and liquidation
- Common – holds lesser claim on the assets and claims than preferred stocks, but comes with voting privileges in stockholders’ meetings
This is the term for stock transactions that involve buying and selling of stocks. May also be applied in currency exchange transactions, but we shall get to that topic in another blog post.
Price to earnings ratio (P/E)
Also called “price multiple” or “earnings multiple,” it is a value used to pronounce a stock’s worth, which is determined by computing the quotient of market value per share when divided by earnings per share.
May also be referred to as “stockbroker
,” is a licensed entity that accomplishes stock transactions on an investor’s behalf for a commission. Except for securities that can be transacted without one, most stock trade transactions must be executed with the help of a broker
2 main types of stockbrokers
- Full service – an individual who carries out stock deals for an investor, typically on the floor of a stock market exchange like in New York Stock Exchange (NYSE)
- Online broker – a web-based brokerage service that facilitates electronic stock trading transactions.
This is a fee one must pay the broker in return of his or her service in a successful stock trade transaction
Research which stocks are the best to buy
Stocks come in several types and classifications so you cannot just buy one without picking out which best suit your investment goals. Types are classified according to the level of ownership on the certain share and depending on what kind and the size of the company offers them. Namely, there are preferred, common, income, value, growth, and blue-chip stocks.
Learn more advanced stock trading concepts
Want to exponentially increase your level of stock market knowledge? Enrolling in a stock trading course offered by a credible expert in stock trading. Take advantage of the lectures because they do not only offer teaching sessions but also useful tools and resources. These tools can include case studies, data as well as strategies. All of these can help you a stronger foundation of stock market models and techniques. The deeper your learning about stock investments, the better you become at trading stocks.