Knowing how to play the stock market can be a good investment opportunity, with huge pay offs if you are willing to consider the dangers. For some it can be only a hobby, but usually they are not willing to play with larger sums of money. Obviously the larger the sum of money you are willing to invest the larger the pay off but it also comes with the additional risks. Many may want to use an investment service to manage their funds for them the ability to understand how the stock market works for yourself could be priceless to having your cash put where you prefer it.

There are certain things to keep in mind when thinking about investments. This is real money, it may not seem like it but, much like shopping online there are real losses found if you invest wrong. Usually it can seem like a complete danger going on water cooler chatter and gut instinct to be successful but there is more to understanding the stock market than simply sheer luck. Once you understand however that this isn't just a game of luck you will be able to invest cleverer and be better able to manage your cash.

Some of the basic explanations necessary when thinking about how to buy stocks are as follows. A share is very literally a share or part in the company. Whenever you own a percentage of that company you are entitled to the same percentage of it's earnings. The money given to shareholders is termed dividends although not all stock pays dividends, just long well-known organizations generally, because the newer organizations use this cash as growth stocks to expand the company interests further. Usually stocks are a great way to start a company in a process known as equity financing. The company offers stock to people as his or her investment in the future of the firm, this can be a huge risk since there is no prior history to determine if the company will be prosperous or an instant flop. A similar process can often expand the company, or the option is debt financing wherein the company borrows the cash as a loan.

When setting up a business companies have to select between a loan or public/private investors for their enterprise to fund their venture. To sell stock a firm should also be a corporation, which not like either sole proprietorship or partnership makes the company an organization by itself with a social security number. Stock holders will determine if the venture is an excellent one or not before getting on board. The owner will set the value of the business and also the amount of stock they are willing to let go of, often owners choose to keep nearly all shares so that they retain sole control of the company. The more shares there are the lower the price of the shares which will make them more desirable to smaller investors. Whenever investors want to sell their shares in the company they have two options, sell to someone they know or use a bigger forum like a stock market. Stock markets or stock exchanges are widely-used to trade shares in public companies. The share owner doesn't necessarily want to travel to a stock exchange themselves so they will go through a stock broker who can do their trading for them. There are three major stock exchange in the U.S; American Stock exchange (ASE), the New York Stock exchange (NYSE) as well as National Association of Securities Dealers (NSADAQ).

how to play the stock market