Whether you realize it or not, you are likely exposed to stocks. From 401(k) retirement and pension accounts to savings plans and even insurance policies; the stock market should play more of a role in our daily lives than ever. Did you know the stock market basics most people miss?
What You Didn’t Know About Stock Market Basics
While corporate stocks have been soaring since 2017, just 54% of Americans invest their money in the stock market through individual stock holdings, mutual funds, pensions, and retirement plans. Nevertheless, participating in the stock market is one way that savvy investors can establish and grow their wealth.
Understanding the stock market for beginners
Advances in trading technology the proliferation of low-cost brokerage services have opened up stock markets so that practically anyone can invest in the stock market. Before investing in the stock market, however, you must have a command of certain stock market basics, like what the market indices are or the difference between speculation and investment.
Stock market basics: what is a stock exchange?
At its essence stock market is a network of economic transactions through the buying and selling of stocks (also known as shares) that represent ownership claims on businesses. The stock market is comprised of different exchanges that serve to bring buyers and sellers together to facilitate transactions, which the exchange tracks during market hours. When you hear that the stock markets have gone up or down, this is the major market indices which track the performance of groups of stocks on an exchange.
What you should know about bull and bear markets
While it may seem odd to hear animals of prey referenced during a discussion about private wealth management and stock market growth, no animals were harmed in the writing of this blog. Simply put, a bear market means that stock prices are falling (and therefore that businesses are losing value) and a bull market means that stock prices are rising. (Fun Financial Fact: We’ve been in a bull market for more than eight years.)
The difference between stock market speculation and investment
When you invest in a stock, you are essentially giving your money to a company so they can put those funds to use for productive projects like expansion and growth. Whether you’re investing in a factory, research, and development, or a new business model, your investment is made with the expectation that the outcome of those efforts will be worth more than your original investment. In this sense, investment in the stock market is a rational decision made with an eye toward future returns.
While stock market investment is grounded in research, financial education, and a reasonable expectation for success or ROI, stock market speculation is closer to gambling. Typically speculators purchase stocks with the intent of turning them over and selling them at a higher price, without an understanding of the value offered to the market by the company’s stock.
Take Advantage of the Stock Market Rally Today
As we continue the second longest bull-market run in stock market history, make sure you know more than just the stock market basics by working with our financial planners in Las Vegas.