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    Stocks A Newbies' Guide: An Everyday Guide to the Stock Market: Newbies Guides to Finance, #3
    Stocks A Newbies' Guide: An Everyday Guide to the Stock Market: Newbies Guides to Finance, #3
    Stocks A Newbies' Guide: An Everyday Guide to the Stock Market: Newbies Guides to Finance, #3
    Ebook120 pages1 hour

    Stocks A Newbies' Guide: An Everyday Guide to the Stock Market: Newbies Guides to Finance, #3

    By Alan Northcott

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    About this ebook

    SUMMER SALE PRICE!

    Whether you are a complete investing novice or you already have a stock portfolio, Stocks - A Newbies' Guide is an accessible reference book that explains all you need to know about the stock market. It explains all about stocks for beginners.

    Don't get fooled by any-get-rich quick schemes for your investments, you need stocks for the long run. Armed with the knowledge from this book, you will be able to see through the scams and formulate your own plan for growing your wealth, investing with stocks online.

    The Newbies' Guides to Finance books give critical advice on a variety of financial issues, and Alan Northcott, a well-known trading educator and author of the series, reveals in this book:
    How the stock market works
    How stocks compare to other investments
    What influences the price of a stock
    What you should look for when picking stocks for your portfolio
    Why you should retire your financial advisor
    How to create an investing plan
    Selecting a strategy that is right for you
    Becoming familiar with online trading
    And more
    You owe it to yourself to know the different strategies and ways you can choose your investments in the market, and find out the benefits and pitfalls of each. The information contained in this book will stand you in good stead for the rest of your life.

    "This a great book to get a foot in the door and understand the basic concepts on stock investing. If you are investing on your own throughout an internet broker this is a good book to help you get on the right track and understand the different ways to go about investing. Highly recommended" - Carlos M. Velez

    "What I like about Mr Northcott's book is that he covers everything a newbie needs to know. . . this book is well worth the investment. Pick this one up if you're serious about investing in the stock market." - Louis Dunmall

    Whether you are new to the market and nervous about stocks and investing, or have been investing in stocks and bonds without achieving the results you expected, Stocks - A Newbies' Guide is sure to help.

    LanguageEnglish
    PublisherAlan Northcott
    Release dateJul 28, 2014
    ISBN9781501494246
    Stocks A Newbies' Guide: An Everyday Guide to the Stock Market: Newbies Guides to Finance, #3

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      Stocks A Newbies' Guide - Alan Northcott

      What is a Stock?

      B

      efore we can go into discussing stock markets and what use they can be to you and your money, you need to understand what a stock is, and how it all works. This guide is for newbies, so I am not assuming any previous knowledge on your part. If you already know about the stock market, simply skip the first three chapters or treat them as a refresher course.

      Put simply, when you buy a stock you own a part of a company. This is because when the stock was originally created, usually with what is called the Initial Public Offering (IPO), the founders or owners of the company involved decided to sell part ownership in order to raise money for its operation.

      You usually get some benefits or privileges from owning stocks, such as for instance sharing in the profits, but unless you are Warren Buffet or another major investor, you will probably not be recognized if you choose to visit the company.

      That is because there are many shares issued, so you generally only own a very small part. For instance, Apple's shares are selling at several hundred dollars each, which may seem a reasonable amount to you, but you must consider that there are nearly 1,000,000,000 Apple shares on the market.

      Incidentally, I used both the words stocks and shares above, and for our purposes, they are very similar. The difference is usually in the way the words used, with stocks commonly referring to shares in several different companies, and shares usually referring to holdings in one company only.

      Although you only own a small part of the company, you may have a part to play in its running. There is always an Annual General Meeting or AGM that shareholders are invited to attend, and shareholders can influence a company's direction if they work together en masse on matters that are voted on there. In addition, shareholders often receive a regular income from the company.

      Many years ago, shares were physical pieces of paper, and might be kept in a safety deposit box in a bank; nowadays, you will not receive any certificates, but simply have your shareholding recognized electronically. This change makes it easier when you want to buy and sell shares, which you can do online.

      Some companies choose to remain privately owned for many years, which means they are owned by the founders, an investment group, or the people who work there and their friends, and shares are not offered to the general public. But if a company wants to raise a major amount of capital for research, expansion, or other purposes, then going public is a clearly defined path. It also allows the founders and original owners of the company to get back some of the money that they have invested.

      There is a saying Don't put all your eggs in one basket, and this applies to share ownership. You should not count on any one company, however great it seems, to grow your savings.

      Market Sectors

      Companies are classified into different fields of operation, such as mining, electronics, retail, etc., and you will usually aim to own a mix of these. This is for the simple reason that you do not want to be caught out if a single type of company or market sector as it is known suffers a downturn. You may remember more than 10 years ago when the dot-com companies were all the rage, then crashed when people realized that the value was not there. Anyone who was following just the high flyers, many of which were in the dot-com field, suddenly found themselves much poorer.

      Company Size

      In addition to having different market sectors, stocks can also be classified by the size of the company, with large caps being the largest multinational corporations, mid-caps the next but still very large companies, and small caps. These classifications have standard definitions in terms of the total value of the company. The value of the company is calculated simply as the total number of shares issued multiplied by the share price. Not all companies are as large as even small caps, in fact many are not, though if you get down to the micro level of companies, they are likely to be more risky places to put your money.

      Going Public

      When a company issues shares to the public, it will do so with the initial public offering as mentioned above. At this stage, it has several choices. For instance, the original owners of the company can retain 50% or more of the value so that they have ultimate control and cannot have their company hijacked by new shareholders, or by a rival company seeking to buy them out. Alternatively, and depending on what the original owners want out of the issue, they can choose to sell off much of the value, and make more money for themselves.

      In preparation for going public, it is usual to employ financial advisers who take a look at the company and form an opinion of its overall value. They then recommend the value to be floated on the stock market. Even when the value has been decided, there is no rule on how many shares a company has to issue, for instance, the owners could choose to issue one million shares at $500 each, or 500 million shares at one dollar each, and that would amount to the same valuation.

      Another factor for the valuation is that it always looks good if all the shares in the IPO are sold quickly, so the financial advisers try to anticipate the demand of the market when they set the price. Sometimes they will also try to guarantee that the shares will be sold by having private arrangements with pension funds and other major financial houses who will commit to buying a certain amount, and maybe even picking up shares that are not sold immediately.

      You have probably heard tales of people making fortunes by

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