While you have undoubtedly heard about the stock market, if you are like many people, you may not really understand how it works. Stocks go up, stocks go down, people make money, and yet it all seems so mysterious. Well, with this course in Stock Market 101, you can start to understand just what the stock market is, how it works, and how you can make money in it.
What exactly is a stock? Essentially, each company in the stock market issues shares of stocks. Each share represents a little piece of the company. By purchasing a share of stock, you own a (very small) part of that company.
When a company does well, more people want to own stock in that company. This increases the demand for its stock, and, following the rules of supply and demand, this drives up the price of its stock. Therefore, the shares you own in that company will be more valuable than they were when you bought it.
Conversely, if a company is not doing well, people will want to get rid of their shares. They will try to sell these shares, and as demand drops, so does the price. If you were unlucky enough to buy stock in the company before the price dropped, you will lose money.
There are many different stock markets all around the world, but in the United States, the three most important to learn about in Stock Market 101 are the Dow Jones, the NASDAQ, and the S&P 500. These are all indexes that can be used to track the overall movement of the stock market.
For example, the Dow Jones tracks the stock prices of 30 major companies. The NASDAQ focuses on technology companies, and the S&P 500 includes the stocks of 500 companies. Following these indexes will give you a good sense of how the market is doing as a whole.
How does investing work in real life? Well, there are many, many complicated forms of investing, and many different ways to try to beat the market and make money. However, when you are just starting out, you need to keep one thing in mind: No one is able to beat the market for long.
If you are trying to save for retirement, or college, or some other long-term investment, the best thing you can do is to just park your money in an index fund and ignore it for many years. Do not pay any attention to the up-and-down movement of the market.
Stocks go up and down on a daily basis, and if you try to follow these too closely, you are just going to become anxious and stressed. Over the long term, the market tends to go up. If you put your money into a fund that tracks this overall trend, you will make money over the long run.
There is a lot more to the stock market, but this article should have taught you the basics of Stock Market 101. Keep researching to learn more about how the market works.