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Stock Market – How Indexes Help You Make Investment Decisions

The stock market is a system of exchanges where people buy and sell stock – or shares – in different companies. These exchanges are where buyers “meet” sellers to trade stocks at a set price agreed upon by both parties.

Whether a company receives a lot of investments should be indicative of its perceived performance. Businesses that are performing well will typically receive more investment and trading action than others that are failing.

Changes to the Stock Market

Technology has changed the stock market immensely in more recent years. The evolution of computer technology and Internet tools has completely changed the way that investors buy and sell their stocks compared to past years.

The “exchange floor” formerly simply referred to the hustling hub of activity taking place on a physical floor where all the investors met to trade their stocks.

However, stock exchanges have been shifting to a virtual exchange forum since those older days. In fact, it will surprise no one if online exchanges eventually completely eliminate almost any face-to-face trading. However, don’t mistake this ease of online transactions as a substitute for investors still needing to know what they are doing.

Stock Market Indexes

Stock market indexes show the average performances of certain types of stocks or sectors of the economy. Similar stocks and similar sectors are collected together in the same stock market index.

Most people have heard of at least some of the more well known stock indexes. The Dow Jones, the New York Stock Exchange, and the S&P 500 are three of the most familiar stock market indexes mentioned in the news.

These indexes are used to gain an overview of how a certain sector or category of stocks is performing compared against the way the market as a whole is performing. You can learn a lot about company stock performance by looking at stock indexes.

Types of Indexes

One type is the price weighted index, used to analyze the prices of various stocks. This index, however, fails to take into account other important factors such as the size of the company and other pertinent factors about the stocks.

The market value weighted index does consider the size of a company. Changes in price are taken into account but not nearly as much as the number of shares and the size of the company.

Indexes are extremely useful for market analysts and investors alike. They are a great way to assess how the market is performing, which in turn can help you decide what you should do with your stocks – buy more or sell some of what you already have. These indexes provide a convenient source of aggregate market data so you don’t need to do the work of analyzing available data manually.

How to Become a Stock Market Genius

Stock market trading is very popular among investors. However, ups and downs in the market make several investors reluctant to enter the stock market trading. Everyone knows about the potential of stock markets that has the caliber to make anybody millionaire overnight. The game of market pays you extremely well and requires very less time input from you. Even if you are new to the markets, you could become a stock market genius by following some easy tips.

Always remember two golden rules of the stock market game; emotions have no place in trading and one must enter the market with extreme dedication. If you have these skills then you could easily become a market genius by following the tips given below. Following traits are mostly found in most of the successful market genius.

1. Don’t be fool- never buy dead stocks- Many investors buys dead stocks with a hope to make money from them. Such thinking is totally absurd. Always remember that the dead stocks have no value and that is why they are dead. However, you could go ahead any buy penny stocks. All dead stocks are penny stocks but not all penny stocks are dead stocks. Many people had tried buying penny stocks and over a period of time they have made millions by investing in such stocks.

2. Research is the key to success- in stock market trading one has to be really very active while researching for stocks and trading opportunities. The lazier in researching you are, the more money you will lose in the course of your trading. It is very important that a trader must take time to research and find out the best stock for him before he funds in it. If you are also interested in buying the penny stocks and getting rich with them then only hard research could help you buy such stocks. Whatever you do while researching, always remember that it is helping you gaining experience and knowledge of the market. Higher returns in stock trading are only possible if one research deeply.

3. Always invest in stocks that have good liquidity- Liquidity means the conversion for the share for cash. So, whenever you buy a stock, must check for its liquidity. Of course dead stocks will never provide you liquidity. Shares with more liquidity are popular on the stock markets and of course guarantees you more returns. Checking liquidity of shares is easy. Simply analyze the volume of trades for the past one week of the share you want to check liquidity for. Liquidity refers value of the share and therefore more liquidity means more value and vice versa.

4. Determine the undervalue stocks and positions in them- when going for purchasing shares, you must lookout stocks that give you more dividends. This is called as dividend research. So next time you buy the stocks, simply perform dividend research and go for higher dividend paying stocks.

5. Market watch- again one of the most crucial task, you need to perform. Before buying any stock, you must look for oversold or overbought and then decide your move. Keeping a watch over the market will help you take good decisions and you will be updated with the current trend of the market.

6. Effective planning- before entering the stock trades one must plan his trading strategy effectively. Many investors buy stocks, and do not know when they have to come out of the trade as a result they lose money. If you preplan your trade then not only you will make money but would also be able to avoid emotions (the biggest enemy of a stock trader.)

7. Check for stocks from reputed companies- this does not means that you have to buy the top stocks that cost very high. By checking for stocks from reputed firms means that before buying stocks of a company you must cross check the reputation of the firm. It will help you determine their trading practices, which indirectly affect value of their stocks. Even if the shares of a company are at low (risk), one could buy invest in them citing the past company performance and its reputation.

Becoming stock market genius is not a tough job. Following few simple tips anybody could become a successful stock market trader.

5 Tips on How to Start Investing in the Stock Market Today

Many new investors have read up on the theories of stock market investing but are still unsure as to the actual steps involved in the investing process. How to start investing in the stock market is a question faced by many beginner investors. This article offers you some basic steps that you can start with today.

Why are you investing? Ask yourself your reason for stock investment – is it to get a fixed income every few months? Is it to save up for your retirement? Is it to generate profit over the long term? Is it part of your get rich quick scheme? The latter is called speculating and investors usually do this on a short-term basis; however speculating in the market is not advised for beginner investors. More commonly, investors invest for income (in the form of dividends) or growth (in the form of rising stock prices whose stock can be later sold for a handsome profit).

Figure out how much risk is associated with share market investing and what your risk threshold is. Yes everyone’s is different; yours will depend on many factors including your financial situation, your nature, your psychological needs, etc. There are many different kinds of risks that you must consider before investing in the stock market – everything from financial risk to interest rate risk to personal risk. Once you have understood each type of risk, you must evaluate how risk-averse you are and then set about minimizing your risk and maximizing your profits in the stock market. Some strategies for minimizing risk are market research, diversification and sound financial management and planning. Once you have covered this, then you can begin to understand how to start investing in the stock market.

Many people start investing by playing it safe with mutual funds. Mutual funds are stock portfolio aggregates compiled by most brokerage and financial firms. They are just that company’s estimation of a fairly “safe” balance of stocks to hold – the aim of mutual funds is to provide stable income so they are not too risk-intensive. The theory is that since mutual funds invest in stable stocks in the major markets and stock indexes, then their rate of return closely mirrors those indexes.

Some people start stock investing by going for the hot tips offered by the internet or local brokerage services. This may not be a wise strategy for a beginner investor because it means relying on others to tell you what to buy and sell and when. If you really want to treat stock market investing seriously then you must do all the hard work yourself and start to trust your own instincts. Sometimes just by having your pulse on the market, you can come to insightful conclusions and beat the “hot tips” guy.

Start by investing small amounts. Most traders refer to the first 6 months as the green period. You should not be making any major investments during this time. Instead you should be closely studying the market, making small investments and tracking and monitoring them continuously so as to be able to gauge developing trends and develop a knack for picking winners.

Stock market investing is not a game, nor is it a gamble. It’s a carefully calculated program, and when used properly can generate a continuous stream of passive income for you. So follow the tips outlined here and learn how to start investing in the stock market today.