In recent years the stock market has seen substantial declines. People who have been investing in the stock market over the last few years may be reluctant to open their statements for fear of seeing how much their portfolios have declined. For the beginning investor, this perspective can result in procrastination in stock investing.
If you are about to begin investing in stocks, understanding the financial markets may be as confusing as the cockpit on a 747 airplane. All of the financial, speculative and market data that is available can leave you feeling overwhelmed, but without knowledge that you were seeking.
Although people have been trading and investing on the stock market for over 200 years ago, there are still many people not familiar with some basic aspects of this arena. The stock market is an everyday term we use to talk about a place where stocks and bonds are "traded" — meaning bought and sold. Stocks are units of ownership in a company. The sophisticated term for issuing stock to raise money is equity financing. The money received from investors who buy stocks is called equity capital. Companies issue stock to raise money. They use this money to finance expansions, pay for equipment or any other resource-intensive activity. Corporations may issue stock when they need additional capital to operate successfully. If the company's profits go up, you "share" in those profits. If the company's profits fall, so does the price of your stock. If you sold your stock on a day when the price of that stock goes above the price you paid for it, you would make money.