We can’t deny that the stock market in a wide ocean that full of many secrets and factors that control it, we always think about how to understand the basics of the stock market? To be honest start investing in stocks without getting most of the information is wasting time, as definitely, you will lose and quite, but don’t frustrate it is not difficult as what you are thinking, it’s simple as a piece of cake, in this article we will tell you everything about stocks and stock market in order to start investing with low risk.
First off, in the beginning people used to make money on their own such as starting a new company or trading and this kind of business is great and successful as long as the capital is small, but when you start thinking about a huge project that will cost you a two or three million dollars –for example- and you don’t have this sum, so you can issue stocks with a specific price in order to allow people to buy it and you will collect the money you need for your project and this is called IPO in the stock market.
Stocks are such a deal between the company and you, after buying stocks from any company you became a partner and you will get your profits according to the percentage of each stock you bought.
Read Also: How to Pick Your Profitable Stock
In the stock market you can find more than 15000 companies from different types of activity that will allow you to buy their stocks with exchange fees, every company gives its information to the stock market, so we recommend you to study the company’s information well before buying its stocks.
Bonds: companies issue bonds also like stocks in order to get the needed sum of money, but what is the different between stocks and bonds? As we mentioned above when you buy stocks you became a partner and will get profits from the company, but when you buy bonds you will get profits but you are not a partner and you are not allowed to know any information about the company and also, you are not allowed to vote for anything belongs to the company.
Mutual Funds: it’s a place where the money collected in order to use in investing purposes such as buying a group of stocks.
Mutual funds are managed by professionals that will make the right decision instead of you and all you have to do is going to the bank to get paid.
What about the broker? The broker is the dealer between you and the company as he always provides the investors with the information they need about the stock market and the companies, and this option will be great for beginner investors.
Calculate the Stock Value:
No doubt that the company’s profit divided by the number of stocks
Let’s say: Microsoft has 5000 stocks allowed to common public and its annual profits are 2.000.000 USD so we will divide 2.000.000 UDS/5000= 400 USD per stock (for example)
So to determine the stock price you have to collect the entire profit/stock in the first year and the second year etc.
This number is not accurate as there are many factors may effect on the company:
For instance: the company that doesn’t grow need to decrease this number 10%.
How to calculate the growth rate of any company?
The growth rate is the most important thing you need to understand in order to find the right company and avoiding losing your money.
The growth rate depends on many factors and whatever you are going to do it will be estimated,
First: Let’s say, you bought stocks from three companies
1st company: no news from it all you know that it’s still working well.
2nd company: its employees started to retire and there are low rates of production.
3rd company: bought new machines and asking for new workers.
So what your mind tells you about these three companies?
Second: The news you get about the company will be very useful to make you get the growth rate.
For example, a new brand computer company and people started to interact with it positively such as on social media, news and etc. so the growth rate is going well.
Hope you found what you need to know about the stock market.