(An irreverent, simplistic look at stock market basics)
Stock Investing as a Home Business
As all successful sports coaches always remind their athletes, "You can't win without knowing the basics or fundamentals of the game." Your stock investing business is the same: you can't be successful without knowing the stock market basics.
People have been investing in some form of organized stock market in the United States since the late 1700's. Other countries have their own stock markets, and, depending on rules in various countries, you may or may not participate in different stock markets. Millions of investors, traders, swindlers and brokers, and other “players," have participated in market activities. Many have made money and many have lost money. Over time, the little guy has lost more than the others, due to two factors: a lack of knowledge and a lack of proper mental preparation.
Let’s look at some stock market basics. If this information is too basic for you, skim quickly and move on. Warning: If you’re losing money, this information is not too basic.
The stock market is a fast moving, non-forgiving enterprise. Survival requires serious self-discipline. Your emotions can defeat you. To be successful, you must strengthen your self-image. Then you must develop your own strategies and follow them. Just as important is the need to learn as much as you can.
The stock market is a large crowd of people, including you and me. Each of these people tries to take money from the others by outsmarting them in a game or process that enables people and institutions to buy and sell (or trade) shares of stock among themselves.
A share of stock is a fractional piece of a business corporation. These are the "chips" in the game that you buy with your hard earned money.
You are one of the players in this big game. You bring your hard-earned money to the table, trying to make it grow, while all other players are trying to outsmart you and take your money away from you. You need to learn how to be smarter than the other guy.
As a beginner, you usually find a “stock broker” (registered representative), kind of like a “dealer” in Las Vegas or a “bookie” out on the street. The stock broker will show you how to buy and sell stocks and other “investment vehicles.” However, the stock broker usually has his own agenda – to "move" stocks in his company's inventory.(Confession: I spent 6 years as a stock broker, so I saw the game from the inside.)
You could start an account with an online (internet) broker. You may also get into the game through some sort of government tax related method, where an investment company takes your money and pools it with money from thousands of others. They now play the game with your money and show you the score from time to time.
In this game, each person is there for their own self. Brokers are not social workers. In theory they help you, but they are employees of brokerage firms. They make money by taking your money and selling you their inventory. If you ever have any doubt about this, ask your broker to return your money. Brokers work on what they call the "mushroom" theory. The clients are the mushrooms: they keep them in the dark and feed them manure.
The government insists that Brokers and their firms play by the official rules (SEC, NASD and other government and industry watchdogs), and punishes them when they don’t. They paid about $1.5 Billion in fines after a round of investigations in the early 2000's, only a small percentage of their profits. No one returned lost money to you and the other millions of investors. Therefore proving your best protection is your own knowledge – know your stock market basics.
Yes! Absolutely! You can win, and you can win big. I know several people who started small a few years ago and won many millions of dollars. Some managed to keep most of their profits – they knew their stock market basics. Others managed to lose more than they won – they didn't know their stock market basics or they trusted their brokers.
How can I make big money in the Stock Market and keep it?
Prepare yourself to become a stock market winner.
1. Jesse Livermore
2. Bernard Baruch
3. Warren Buffett
Remember, professionals and business people in every field learn and prepare. The profession of investing or stock trading is no different. It is a serious business. It can be fun. But, do you really want to throw money at the market with your eyes closed? You really should start your education now. After you learn the stock market basics, you need to continue to learn more. Remember, you need to know more than other players in the stock investing game.
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One of the funny things about the stock market is that every time one man buys, another sells, and they both think they are astute.