A Brief Glance About the Stock Market

Depending on monthly salary alone is not sufficient to fulfil dreams. It has become necessary for every person to find ways to earn additional income. Saving money is essential. It would be difficult to lead a happy life after retirement by depending on annual salary alone. Of the different paths available for a person, investing the right amount in stocks is a healthy option. However, there is a necessity to understand about the working procedure of the stock market.

A stock market is a public entity. Economic transactions occur at this place. It is a platform where stocks and derivatives of a company are available for trading. Every stock has a specific price set by the company. $36.6 trillion dollars is the world’s stock market value. Possible investors buy or sell stocks or derivatives of a company. A stock exchange is a formation of mutual corporations or entities of corporations. It specializes in bringing both a buyer and a seller onto a single venue.

Stock market platform is an open market. It includes individual investors to large hedge fund traders. A professional working in the stock exchange notes down the request and performs the necessary action of buying and selling. Transactions are also carried out physically in a stock market. This is referred to as public outcry. Under this procedure, a trader enters the participation of the auction by placing a verbal bid. However, availability of computer and internet changed the entire scenario. Trading is now carried out electronically. The internet connects numerous traders from different parts of the globe. Virtual trading is easy in comparison to physical trading. It eliminates the need to visit a stock exchange physically. Moreover, with complete information available on the internet, it becomes easy for a trader to buy or sell stocks at the right time.

Trading takes place when the ask price and the sell price coincide. This is a first-come-first-served procedure due to multiple bidders in the market. A stock exchange plays a vital role in exchanging securities of a company. It is important for a company to list their stocks with the exchange. Selling securities or derivatives helps a company raise capital. Any business can sell a specific percentage of ownership in the public market to raise capital. An economy where the stock market is rising is considered as an up-coming economy.

The central bank watches the entire trading procedure. This is essential for smooth flow of financial system within a country. It also regulates the pricing of a stock, as most companies increase it for financial benefits. Share prices have a direct effect on household wealth. A stock exchange acts as a protector and as a mediator to a buyer. This reduces risk and helps an individual investor to avoid counterfeit actions. A smooth functionality in a stock exchange drives economic growth. Companies have an opportunity to expand, create employment and increase.

Mastering Challenges in Your Stock Market Investing

We know that there is no easy quick-fix to developing wealth. How many of you who are in salaried employment moved straight from no experience to a position of seniority and expertise in whatever field you chose to work in.

Chances are that path was slow, you may well have had to study either formally in an education institution or through a period of on the job training and supervision. There were undoubtedly times when you hit problems…problems with learning the next skill that seemed so difficult, problems on the job when unexpected things occurred that were new experiences for you, and perhaps times when you had to deal with difficult situations.

Although often tough, these situations will have contributed to your growth as an employee, gave you invaluable experiences that you could draw on in the future and potentially created the opportunity for promotion and reward.

Why then should your investing journey be any different? Why do some expect wealth to drop easily into their lap? The reality is that most people will not become wealthy because they will either perceive that starting that the journey is too difficult (or in other words too much of a problem). The majority that do overcome that first set of problems and actually start soon give up when faced with new problems and realise that perhaps it is not the quick fix that they seem to feel is their right, subsequently give up and go onto the next doomed scheme which again will be short lived in duration when problems occur.

‘Problems’, as we term them, are a fact of life, necessary for growth of us as individuals, communities and the human race in its entirety. Every new invention, life-saving drug, life-changing discovery has occurred because someone, somewhere, sometime identified a problem and chose to find a solution. Problems may serve a protective function to highlight things we need to know or do, and the reality of it all in simple terms is that the only time you will no longer have ‘problems’ is when you are feeding worms and no longer on this mortal coil.
So on to taking the context of problem management and applying key concepts to your trading.

What may constitute a trading problem?

The obvious is a trade that has gone wrong way resulting a capital loss, this may be over a number of trades. Often this is too simplistic. In broader terms i would like to suggest that a trading problem is not only the above but rather anything that effects your ability to have a plan, trade a plan or reviewing your plan in the way you KNOW you should do. Any deficit, in any of these three areas can result in a capital loss. Invariably it is this rather than a hunt for the holy grail of technical indicator to add to your game that will make a difference on a sustained basis.
Let us start with probably the number one key issue, that of your attitude to trading problems.

There are essentially one of two camps you will fall in. Firstly you can perceive problems that occur in your trading as a threat of, or actual, loss of something important, something to beat yourself about or worse attach the blame to others. Perhaps you see these problems as a threat to your competence becoming fearful of continuing to invest, devastating not just your capital, but more damaging going forward, your trading self-esteem.

The second, and one could strongly suggest, more constructive way to look at trading problems is to develop an attitude of that mentioned earlier, to see it as necessary for your trading growth, an indication that something could and should be better in your trading game if you want sustained success. Examples of such could be identifying a gap in knowledge or the way you organise yourself when trading, or simply the need to follow through on a trading plan you have developed. The attitude here is one of building your trading ‘muscle’ so you can remain strong and do the right thing in any market.

The law of natural selection is based on the survival of the fittest. Applying that concept to your trading should you not strive be as fit as possible? Of course this makes sense and here’s the fact, it is experiencing, identifying and addressing problems that will provide you with that trading fitness to not only survive, as many traders wont, but also thrive on a sustained basis.

I have a close friend who i play football with on a weekend. This guy is incredibly fit, with the enviable sculptured frame. I asked him how did he develop the ‘look’, fitness, confidence and stamina that allows him to perform at such a high level on the pitch. He outlined his regime of daily nutrition and fitness regime suggesting that he has developed over a substantial period of time having to work hard pushing weights and exercising through his previous resistance levels. Without going into too much detail the key word I figured is the concept of pushing through resistance, without this he would not have developed the muscle and stamina that he has today.
So bringing this analogy back to your trading practice, seeing problems that you encounter in your trading practice as resistance that you MUST push against and conquer, to build your trading decision-making muscle seems logically the only way you can move to the next level of success.
Think for a moment in terms of where you have come from to date as a trader. Things you once saw as problematic, perhaps a concept you found difficult to grasp, may now no longer be a problem. What was probably difficult for you before, is now easy, as you have pushed against the resistance initially created by the problem. The only reason you were to get to a place of mastering that problem was an attitude that enabled you to push through. That attitude in turn enabled you to make good choices and adopt the behaviours necessary to develop sufficient trading muscle to overcome any barrier that our first group of individuals would never have achieved.

How to Invest in the Stock Market Safely

Everybody understands how important it is to save money for your retirement, and these days it can be more important than ever. The problem is, the stock market is very difficult for the ordinary investor to understand completely and with this massive recession we seem to be in at the moment, the stock market seems crazier than ever.

The alternative used to be to purchase government bonds or certificates of deposit from the bank but with the recession the way it is and the Federal Reserve keeping interest rates and near zero, it doesn’t make any sense to invest in those type of safe havens anymore. If you calculate for inflation they actually pay out a negative interest rate!

Which brings us back to the stock market. Unfortunately I think everybody has had experience personally or have at least known somebody who has lost their life savings in the dramatic market drop recently, and it’s so very hard to climb back on the horse and invest in the stock market but you have to do something!

What’s the solution then? Well I think I have one

My strategy harnesses the power of math and the law of averages. Here’s how it works; set aside a certain amount of money that you would normally invest in your retirement account every month. Set up a system to direct deposit that amount of money, either directly from your paycheck or directly from your bank account into your retirement investment account with instructions to invest it in an S&P 500 index fund (the same fund every month).

Be sure to set up this scenario through a mutual fund or retirement company of some sort so that you don’t have to pay a fee every time you make a contribution to the account.

So what exactly does this strategy accomplish?

Over time historically speaking the market has increased 7 to 8% per year and that’s held true over the last 50 odd years. But it only holds true for the entire market as a whole, not individual stocks and that’s where people get into trouble.

When you invest in individual stocks you can easily lose your money but if you invest in a broad stock market index fund it is virtually impossible to lose your money. The entire market would have to tank in order for you to lose and if that was the case civilization would be over anyway and you’d probably already be dead.

Having the money directly deposited automatically every month means that you will take advantage of the stock markets dips and rises mathematically. Some months you’ll purchase when the stock market is up and some months you’ll purchase when the stock market is down and this is where the law of averages works to your benefit.

Harnessing Stock Market Volatility

If you were to Google “stock market volatility”, you would find a wide range of observations, conversations, reports, analyses, recipes, critiques, predictions, alarms, and causal confusion. Books have been written; indices and measuring tools have been created; rationales and conclusions have been proffered. Yet, the volatility remains.

Statisticians, economists, regulators, politicians, and Wall Street gurus have addressed the volatility issue in one manner or another. In fact, each day’s gyrations are explained, reported upon, recorded for later expert analysis, and head scratched about.

The only question I continue to have about all this comical hubbub is why don’t y’all just relax and enjoy it? If you own only high quality income generating securities, diversify properly, and adopt a disciplined profit-taking routine, you can make stock market volatility your very best friend (VBF).

Decades ago, a nameless statistics professor brought me out of a semi-comatose state with an observation about statisticians, politicians, and economists. “In the real world”, he said, “there are liars, damn liars, and any member of the groups just mentioned”. An economist or a politician, armed with a battery of statistics, is an ominous force indeed.

Well, now, all economists and statisticians have high powered computers and the ability to analyze volatility with the same degree of certainty (or is it arrogance) that they have developed with regard to individual-stock risk analysis, economic and geographical sector correlation dynamics, and future prediction in general.

Essential Tips for Stock Market Investing

But make no mistake about unless you are prepared to take some risk you will never get the kind of gains I achieve year after year trading momentum, growth stocks.

How old you are should play an important factor in how you invest. If you are young, investing in blue chip stocks can really benefit you in the long run. Blue chip stocks belong to well known, massive companies that always tend to grow favorably. If you are older, bonds are a better option to put your money into.

Before you invest any money in the stock market, you will need to dedicate some time for educating yourself on the different aspects of the stock business. People think making money trading is easy. Why? It’s one the most difficult careers one can choose. Why people think they can buy a $200 piece of software and outperform the major investment firms is beyond me. You will gain much needed experience and learn many tips and tricks for picking the best investment stocks. It is a good idea to spread some money around in many different stocks than invest solely on one company. If you invest all of your life savings into a shoe company and then it comes out they are making their shoes out of endangered pygmy baboon hides, you are in a world of hurt.

Investing in bonds is much easier than stocks for many people. There are many different government bonds and corporate bonds to choose from but a broker or your banker can give you lists and advice on them all.