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Monday, February 2, 2009

Stock Tips For The Beginners

By John Border

We all dream of the day when we can be in our house sitting on a sofa sipping nice tea along with an assortment of cookies and in the meantime you know that every minute there is money rolling into your bank account . Talk of good times and if wishes were horses then everybody would ride them.

Yes, in theory the above can be true but there are two ways to do that , the first one to start a company, make it profitable, sell a a majority share to somebody else then reap the fruits of your labor through that minority holding in that company. The other way is less labor and you can get started with as little as $1000.

High and high gain is the mantra. Buy the stocks at low price and then wait to sell at a higher price. Also do not worry about how much stock holding that you have in the company. You are still an owner with limited shareholding.

Before taking the plunge try to know how the stock markets work and what is the better way to invest in the stock markets. It takes some time and patience to understand and you will be a winner once you know how to play the game.

Let us get the initial understanding of what is a stock? I will take an example of a company called XYZ, newly formed and into the business of selling shirts. This company XYZ will need money to buy machinery, raw material, pay for employees salary etc and the money will come in the form of loans, money from friends and family and also you sell some part of the company to other persons or companies. How do you part with ownership of the company is that you create shares or parts of the company for say $10 each .

Let us say you create 100 shares of the company , that means the total share capital of the company is $1000. Now ideally to maintain a majority shareholding XYZ company can sell 49 shares and still be a mahority shareholder.

Assuming you have $1 shares and 51 shares in a company ABC then you can sell those shares at a much better value than $1 value if the stock market thinks that the company is going to make good profits and they eare willing to pay you a higher pricer than the original value.

Stock exchange and stock markets are a lesson you need to know before you start investing.

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