Have you ever wondered how some investors are able to work the markets and achieve tremendous returns each day even though they only spend a few hours in trading? When you look beyond the hype of many Guru’s peddling their high-priced stock trading courses, you will quickly see that they rely upon signals that tell them when to buy a particular stock and when to sell off when indicators shows signs of a decline.
To get straight to the point, the heavy investors approach investing with a with a set of simple principles and methods that set them apart from the novices. The markets you pick and the types of stock you invest in can make a significant difference on how well your stock performs at the close of the day on the DOW and NASDAQ Exchange.
There are many to choose from ranging from international to domestic. Your approach to any market will be based on your financial standing, your comfort level of taking risk, the your short and long term goals. Before you decide on which stock to invest in, you have to look at the end result and determine what you want the stock to accomplish for you.
For example, are you looking for capital gains or is income your main outcome? Also, are you a day trader or are you planning on holding securities over a long period of time?
Understanding Stock Market Investing 101
The primary definition of a stock is taking part ownership in company or corporation. We’ve all see the recent news headlines over the concerns of U.S. Government baling our Chrysler and GM or General Motors with a huge stake in corporate shares.
To put it another way, once a company files an Initial Public Offering (IPO) and have completed the required legal paperwork, they are granted the ability to go public. Is then that other companies and individuals in the public and private sector can invest in the company’s offerings.
Offerings generally fall into one of two main categories for the sale of simplicity.
The common stock, where the stock represents ownership of equity in a corporation. This type of stock offers the greatest potential for dividend income and capital gains over the long term. Under this model, shareholders have certain authority granted under the filings and can participate in the voting process in company matters and board directors.
Preferred stock’s equity is similar to bonds but differs in that it is not considered debt. The dividends on preferred stock are sensitive to market fluctuations in interest rates and are set at a fixed percentage of the pars or face value of the stock.
Blue chip stocks are represented by companies that have a long track record of maintaining their debt at an acceptable level and they are often well-established in their historical earnings with very little liabilities. The name “Blue Chip” originated from the game of poker where the chip that is blue holds more value than the others.
Growth stocks generally yield a high return for investors because the securities often appreciate. As a business grows, the stock price increases costing more per share.
Penny stocks fall in the category of risky securities and are relatively low priced investments. Additionally, unlike the others, they are traded over the counter beyond the other big players in the major exchange.
Value stocks are securities deemed as under valued by investors and therefore represent a great investment over the long term since the stock is often traded far below real market value.
Income stocks are an attractive investment for investors because income gradually grows over time offsetting inflationary losses. Additionally they offer a much higher dividend in relation to their market price.
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