Introduction to Stock Market Investing

Why Invest in the Stock Market?

• Despite financial challenges, investing can be profitable.
• The goal is to incrementally increase wealth over time.
• Stock market perceived as challenging yet rewarding.

Understanding Stocks

• Definition: A stock (or share) signifies ownership in a company.
• Example: Owning 1 share of a company with 1,000 shares means owning 1/1000th of the company.
• Types of Stocks:
  • Common Stocks: Have voting rights.
  • Preferred Stocks: No voting rights but have dividend preference.

Why Companies Sell Stocks

• Companies issue stocks to raise capital.
• Stocks convert private companies to publicly traded ones through IPO (Initial Public Offering).

How Stock Prices Fluctuate

• Fluctuation based on investor activities and market perception.
• More buyers than sellers increase price, and vice versa.
• Bid-Ask Spread: Difference between buying and selling price.

Supply and Demand in the Stock Market

• Prices rise with high demand and fall with low demand.
• Modern trading systems automate transactions, increasing market speed.

Reasons to Invest

• Potential for higher returns compared to bank savings.
• Compounding growth over time can lead to significant wealth.

Starting to Invest

• Account Setup: Create a trading account with platforms like E-Trade or Robinhood.
• Choosing Stocks:
  • Conduct thorough research on companies.
  • Consider financial health and expert opinions.
• Investment Strategy:
  • Invest only surplus funds you can risk losing.

Conclusion

• Beginners should start small, willing to risk limited amounts.
• Further learning necessary for technical analysis and advanced trading methods.
• Engage in hands-on investing for practical learning.