Stock Market Investing for beginners: THE DEFINITIVE STOCK MARKET CRASH COURSE – FROM ZERO TO HERO. by Warren Ray Benjamin

Chapter 1- Basic Information About Stocks
What Is Stock and What Types of Stock Are Available
People like to throw around the word stock. However, most people don’t
understand what it means. For the record, let’s clarify the meaning of the
word so that you understand what you’re getting into.
Stock is an ownership stake in a company. When a company issues stock, it
divides the ownership into portions called shares. You buy an ownership
stake in a company by purchasing shares of stock, so if you purchase shares
of Exxon, which means that you are one of the owners of Exxon that
entitles you too many things, including a share of the company profits as
the fortunes of the company improve, the value of the shares increases
because there will be more demand for ownership. If the company
experiences bad times, or the economy starts doing badly, investors will
start selling off their ownership stakes. That means supply will exceed
demand, causing prices to drop. Since owning shares in the company may
not be seen as profitable, the prices have to drop to attract new buyers.
Publicly traded companies issue large numbers of shares, and they are
traded on regulated public markets called stock exchanges. There are two
general classes of stock. These are:
Common stock: This is what most people are referring to
when they use the word stock. A common stock gives you an
ownership stake and voting rights in the company. Voting will
occasionally take place when shareholders have the
opportunity to vote on important company decisions. Shares
of common stock entitle the holder to receive dividends. But
not all companies pay dividends, as we’ll explain in a
moment. Something to keep in mind is that common
stockholders are last in line if a company decides to liquidate
or declare bankruptcy.
Preferred stock: These are special shares that are, in a sense,
more like bonds. Preferred stock does not confer voting
rights, but there are other advantages to owning the preferred
stock. In some cases, companies will guarantee the yield paid
with dividends. Preferred stock also confers some rights not
available to common stockholders, such as being ahead of
them in line when a company goes bankrupt. If a company
goes under, creditors and bondholders will get paid first. Then
preferred shareholders will get paid, and finally, if anything is
left over, common stockholders get paid. Most companies
don’t issue preferred stock. Some companies in the financial
sector, like Bank of America, offer preferred stock.
An Overview of the Basics
Let’s begin by focusing on the keys to successful stock investing. You will
be surprised that there isn’t any mystery. Successful investing revolves
around two key ideas.
The overall market trend is rising. Over time, the stock
market always increases. Although it’s easy to panic in the
heat of the moment, history shows that sudden drops in share
prices – even when they are prolonged – are always followed
by gains that take the market to new heights. For long-term
investors looking to build wealth, the trend in the market is
always up.
The stock market is volatile, and some stocks are more
volatile than others are. That means that share prices can
move up and down rapidly for some stocks, while prices are
more stable for others. Learning to recognize volatility and
use it to your advantage is one of the keys to successful
investing. Many new investors don’t realize that it’s easy to
get hard data on a stock’s volatility, and you can use that to
your advantage.
Picking individual stocks isn’t that hard. Many new investors
are intimidated by having to pick their stocks. For some
people, it’s too much, and they’d rather have a professional
money manager do it for them. However, it’s not that
complicated. We’ll teach you some key characteristics a
company should have before you invest. That will make
picking stocks to grow your portfolio much easier.
Diversification is easy. A strategy called diversification can
be overwhelming when you consider the prospect of having

Stock Market Investing for beginners: THE DEFINITIVE STOCK MARKET CRASH COURSE – FROM ZERO TO HERO. by Warren Ray Benjamin