Investing

Tips, strategies, failures, success and more in investing.

So, Why Buy Stocks? For Today As Well As Tomorrow

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Why buy stocks? This is an important question. One that I often hear and when you start trading you will hear as well. There are two main reasons. One, to make money. The other, is for the priceless knowledge that you tend to pick up automatically just from trading.

To Make Money, Of Course

moneyWhy buy stocks? Why of course to make money. Right. Yes, this is true. But there are many ways to make money. And if its only about the money for you, you may want to work with a full service broker. This may not be the important important reason, but without this factor, there would be no stock market.

Yes, you buy stocks to make money. You can make money in a down or an up market. When you buy a stock hoping it will go up, its called buying long. When you want a stock hoping it’ll go down, its called selling short.

You can also make money with stock options. All stock options are connected to a stock. When you buy an option, there is someone else on the other side selling it. This is not like a public company, when you buy stock outright. This is another investor involved. Anyone can sell an option. But, usually the person selling has to have the money already in the brokerage account, just in case the deal goes sour for him.

Before you tackle the selling of options, you should have some experience with buying options, as you can lose a lot of money this way. When you are betting on a stock option going up its called a "call" and when you bet on it going down, its called a "put".

Learn Today, Profit Tomorrow

Another answer to "why buy stocks?" is for the experience and education. For me, and for most other investors, its not all about the money that your making today. One of the reasons I’m trading today it for the priceless knowledge that I will receive. When I’m older and am playing with more money, I will still use most of the same things I know now to make larger profits.

The only difference will be that I will be trading larger sums of money. So its good to get started even if you only have a few hundred to work with.

Find Out What Makes A Business Really Tick

You also tend to catch onto the inner-workings of a business. You begin to understand how a balance sheet works and how money must be divided in order for a business to be successful. Also, when its good to go into debt and just how much debt is too much.

This is valuable knowledge that is important to learn. You may want to use this information some day in your own business. Also, of course the more familiar you get with this information, the easier it will be for you to spot a good, solid company.

Now Your Armed With The Answer

So, the next time someone asks you "why buy stocks?", you can let them know your reason. I am passionate about stock investing. The stock market is real. You can dig deep into a company to see what you are getting yourself into. You can watch the news and find new investment ideas. The stock market is connected to most everything around us. That’s my reason.

The origins of the stock market… from the Maritime Empires to Government regulation

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The origins of the stock market starts in 1606, when the first stock was issued. Trading began in the maritime empires of the Netherlands and Portugal. Those are the empires which revolved around sea travel and trade. From there the idea moved to Spain, England, and finally America, with the English colonists.

Raising Money For The War

So, anyways, back to the stock market here, in the US

In the beginning of the origins of the stock market, the practice of stock trading primarily involved the shipping and spice markets. considering that they started out in the maritime empires. The government of the time decided to sell bonds to rise money for the war.

Those are government notes that were promised to pay out some profit at a later date whenever they decided to cash them in. Then, right around that same time, private banks began issuing stocks to raise money. The whole creation was and is really ingenious.

Obviously, in time businesses decided it would be a good idea to raise money by selling stocks. This started in the mid 1800s. At first they weren’t regulated though, as they are today. Today, as you may know, companies have to be completely open to the public about their finances due to the Securities And Exchange Act which I will go into further detail in just a second.

Promoting the Stock Market in The New World

Who is Alexander Hamilton? Well, he was the first US Secretary Of The Treasury. But, relating to the current topic he is a mojor part of the origins of the stock market. Proudly he promoted the idea of bringing a stock exchange to America. He did this during his term, which lasted from 1789 to 1795. He studied how the British implemented the idea of a stock market and thought it would great for building a strong economy in America. If you ever take a trip to New York City, be sure to check out his statue, which is proudly held in the financial district.

New York Stock Exchange Board to… The New York Stock Exchange

The origins of the stock market also include the rich traders in New York City, who established the New York Stock and Exchange Board in 1817. That became the New York Stock Exchange in 1972 when 24 large merchants got together and decided it would be a great idea for the country. They also came up with the basic rules of trading, most evidently the fact that they would get together daily.

Eventually, the NYSE moved inside to 40 wall street. Then, in 1996 it was remodeled and become the 71-story building today known as The Trump Building.

The New York Stock Exchange is highly regarded among stock traders compared to the other markets due to the fact that they only include large, established companies. For smaller companies, they have to resort to…

The New York Curb Exchange to… The American Stock Exchange

As I’m sure sure you know, the NYSE is not the only stock exchange. There is also the American Stock Exchange, the NASDAQ, and many more.

The origins of the stock market state that government securities were traded outside on the corners of Wall Street and Broad Street in New York City. This was before the inside markets here in America were formed. I glossed over the NYSE. But, along with them, another exchange that came into play in 1842. They were called the New York Curb Exchange. As you may have guessed, they became the American Stock Exchange, or the AMEX.

In time… government regulationgavel
The origins of the stock market do not include government regulation when first starting out in it’s history. We take for granted that companies traded on the stock markets must be completely transparent when it comes to their books. I believe this is a good thing. It opens up companies for traders to make informed decisions. But, like the first generation of most things, the stock market was not regulated by the government.

During the industrial revolution, in 1900, the idea of one investor selling their shares to another investor for a profit came into play. This is what we know today as our commonplace stockmarket. Thus, the secondary market was formed, which is also known as The Speculators’ Market. And the market became more volatile because price became determined by supply and demand.

In 1929, the great stock market crash hit New York City hit New York City, and America. Obviously you probably weren’t alive then. But, we are going through the same thing now. It took fifteen years for the economy to fully recover. But only five for the government to step in.

In case you don’t feel like doing the math, that was 1934. The Securities And Exchange Act was passed by congress that year.

They formed the securities and exchange commission. They were created to regulate stock trading as well as police the daily market exchanges. And, they do that to this day.

The organization also includes overseeing the requirements for a company to issue stock shares to the public and ensures that the company offers relevant information to potential investors.

Over the years, the stock market went from a game of the rich to something being taught in school to 8th graders. If it were up to me, all kids would learn about the origins of the stock market at an early age.

7 Facts To Help You Understand The Stock Market (For Beginners)

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1) Origins Of The Stock Market

Understanding the stock market for beginners starts with understanding the idea of the stock market. Originally, it came to America with Alexander Hamilton. He quickly spread the idea, with the use of his public status. With that, the idea exploded.

The stock market was a way to build up the economy, since it was still in its beginning stages. Today, there is a statue of him in the heart of the financial district of New York.

2) What Is The Purpose Of The Stock Market

There are two purposes for the stock market. The first being for the anyone with a few bucks and a little knowledge to make some money. Of course, if you only have a little knowledge, you are taking much more of a risk.

The second is for businesses to make money. There is much less risk with this. However, there are down sides to this. The first being that the company must give up part of they’re ownership. The second being that they must become completely transparent.

3) Why Buy Stocks?

To understand the stock market for beginners, you must understand, “just why buy stocks?”.

I love to trade stocks. The stock market is real, it’s not a fly by night scheme. It is also hard to master, as with anything worth doing. I enjoy the passion and excitement of being able to invest in the real world as well as being able to learn at the same time.

To me, I see two main important factors for why to buy stocks. The first is to make money. The second is the incredible amount of information you can gain just from practice.

4) Where To Buy Stocks?brokers

One of the basics of understanding the stock market for beginners, is understanding exactly how to go about buying stocks. This is simple. You buy stocks from a stock broker. That’s where I trade. That’s actually the only place. There are two kinds of stock brokers. Both with advantages and disadvantages.

Some charge more, some charge less. Some even manage your money for you. They are all in competition for you. So, make sure you get the facts before choosing one.

5) Stock Exchange Symbols

Stock exchange symbols range from one letter to five letters. In the beginning, with the NYSE, stocks were only assigned one or two letter symbols. The companies that were most actively traded were rewarded with one-letter symbols. Originally, you could tell which exchange a stock was being traded on just by looking at they’re symbol. But, that all changed in 1997.

6) Extended Hours Trading Of Stock

As well as with trading on the regular markets, you can also trade stock in the evening. The stock is not traded on the same exchange as during the day, but something called an ECN. If you wish to trade at this time, you must find a broker that matches your needs. But first, you should learn a little bit about the risks and rewards.

7) Stock Investment Risks

Understanding the stock market for beginners also includes understanding just what you are getting yourself into.

There are risks associated with stock investing, as there are with any true investment or business. Each trading strategy has it’s own set of risk. Of course, with more risk comes the possibility of more reward. So, what exactly is the perfect blend of risk and reward for you? I hope this helps you make your decision.

If you’re not comfortable with the risks associated with the stock market, then perhaps a more conservative approach to making money and managing money will work better for you.