BiggnightsThe Stock Market: Simplified for Idiots
March 2nd 2011 04:10
Far too often the national media assumes everyone has a fundamental understanding of how the economy functions. However, for anyone short of a businessman or business student, this is often far from the truth. It is also quite hypocritical considering how little the media itself understands. Before I attended college, the only thing I associated with businesses was Bill Gates's goofy grin.
Though I am far from an expert myself, I couldn't possibly articulate how many times an article from a well-respected news source has used vocabulary such as Ponzi Scheme, accounts receivable, and inflation without properly explaining what they mean. But have no fear, uninformed layman, for I am here to explain one of the most fundamental yet complicated aspects of finance, the stock market.
In its simplest terms, the stock market is a place where public shares in a company's ownership are sold. In the United States, the New York Stock Exchange (NYSE) is the largest market. The goal of investing, like anything else in this world, is to make money. To get involved in the stock market, any individual can bid on a publicly traded stock, each of which is set at a particular market price.
Typically it is best to invest in companies with a solid positive cash flow and high projected earnings, but there are numerous factors that determine a profitable stock. I will not go into them all now because 1), I don't want to bore you away from my blog, and 2), I would rather spare myself the embarrassment of pretending I am an expert. Instead, I'll simply explain how investing can make you richer than Swiss chocolate.
Essentially, money is earned when the market price on a stock increases. At this point, you can sell your shares in the company at the new, higher price, provided the assumption that there will always be buyers. However, there are a lot of benefits to holding onto your stocks. First of all, you never know how high the price can go. Also, companies often pay something called a dividend. Dividends are returns that a company pays to its shareholders, although they are not required to give them.
This may lead you to wonder why a company would possibly sell ownership in itself to the public. The answer is really quite simple. Equity (a fancy word for stockholder's value in this case) is one of the best ways for a company to raise capital. Companies need the constant flow of investments so that they have dispensable cash to improve their assets. If the investments result in profits for the company, then they will reward their investors, which in turn attracts more investors. It's a sick and twisted circle that can go terribly wrong when there is an inbalance (research the stock market crash of 1929).
Well, there you have it idiots. You can now keep up with the narrow minded mainstream media. Play the market right, and you could be rolling in more dough than a cookie sheet. But beware, for a mishap in the unforgiving financial giant known as the stock market could leave your dispensable income lower than Lindsay Lohan's self respect. I hope this helps, and feel free to comment if you think you can improve my post in any way!
* images on this page were taken from the following Wikipedia pages:
History of Microsoft
Wall Street Crash of 1929
Though I am far from an expert myself, I couldn't possibly articulate how many times an article from a well-respected news source has used vocabulary such as Ponzi Scheme, accounts receivable, and inflation without properly explaining what they mean. But have no fear, uninformed layman, for I am here to explain one of the most fundamental yet complicated aspects of finance, the stock market.
In its simplest terms, the stock market is a place where public shares in a company's ownership are sold. In the United States, the New York Stock Exchange (NYSE) is the largest market. The goal of investing, like anything else in this world, is to make money. To get involved in the stock market, any individual can bid on a publicly traded stock, each of which is set at a particular market price.
Typically it is best to invest in companies with a solid positive cash flow and high projected earnings, but there are numerous factors that determine a profitable stock. I will not go into them all now because 1), I don't want to bore you away from my blog, and 2), I would rather spare myself the embarrassment of pretending I am an expert. Instead, I'll simply explain how investing can make you richer than Swiss chocolate.
Essentially, money is earned when the market price on a stock increases. At this point, you can sell your shares in the company at the new, higher price, provided the assumption that there will always be buyers. However, there are a lot of benefits to holding onto your stocks. First of all, you never know how high the price can go. Also, companies often pay something called a dividend. Dividends are returns that a company pays to its shareholders, although they are not required to give them.
This may lead you to wonder why a company would possibly sell ownership in itself to the public. The answer is really quite simple. Equity (a fancy word for stockholder's value in this case) is one of the best ways for a company to raise capital. Companies need the constant flow of investments so that they have dispensable cash to improve their assets. If the investments result in profits for the company, then they will reward their investors, which in turn attracts more investors. It's a sick and twisted circle that can go terribly wrong when there is an inbalance (research the stock market crash of 1929).
Well, there you have it idiots. You can now keep up with the narrow minded mainstream media. Play the market right, and you could be rolling in more dough than a cookie sheet. But beware, for a mishap in the unforgiving financial giant known as the stock market could leave your dispensable income lower than Lindsay Lohan's self respect. I hope this helps, and feel free to comment if you think you can improve my post in any way!
* images on this page were taken from the following Wikipedia pages:
History of Microsoft
Wall Street Crash of 1929
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