How to Play the Stock Market


When you buy a stock, you buy shares in a company. This means that you own part of the business. You are an investor because you have invested in the company. The stock market is where stocks are bought and sold.

You can buy or sell stocks at any time. You can buy stocks through companies called stock brokerages, like Merrill Lynch or Charles Schwab. You can also buy directly; from the company in direct purchase programs. Or, you can buy a mutual fund, which is a big collection of stocks and bonds. Mutual funds can be safer than buying individual shares of a company, because a mutual fund has experts who pick the stocks for you. A mutual fund helps you diversify your investment. Diversification means investing in different kinds of investments to lessen risk and spread out in a variety of investments that react differently.

Stock prices move up and down, based on how investors feel about the world. When the economy is doing welt it is a boom. When the stock market is up for a long time, it’s called a “bull market.” When it is doing poorly, it is a recesĀ­sion. When the stock market is down for a long time, it’s called a “bear market.” A market that goes up and down a lot is called “volatile.”

When you buy stock, you buy for what the company will be in the future. If the company does better in the future than it did in the past, the price of the shares goes up, which increases your investment and makes you money.

People on Wall Street (where the stock markets are) try to predict what a company will earn. If companies are doing well and they are growing faster than most other companies, stock prices go up.

Stocks tend to give you a better return (more money back) than a savings account. But there is more risk involved in the purchase of stocks. The stock you buy can go down in value as well as up. A savings account doesn’t lose value, but it also won’t give you as much potential to make more money, either. If you’re interested in investing, you can find tons of info online. Many investment firms offer free seminars, and some have free books.

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About the Author: Marie Mayle is a contributor to the MegaHowTo team, writer, and entrepreneur based in California USA. She holds a degree in Business Administration. She loves to write about business and finance issues and how to tackle them.

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