Stocks are small pieces of a company. The stock price (also called a ""share"") reflects the value of the company, and its outlook, as determined by the people trading the stock (traders and investors). Stocks don't have a set price, they continually fluctuate, each second of each day.
Stocks are traded on an exchange, such as the New York Stock Exchange (NYSE).
To make a trade you'll need the stock's ""ticker"" symbol. Type the company name on Google Finance or other major financial portals, and the ticker symbol is provided. Tickers are a one to five letter code used to trade the stock.
Computers and the internet have promoted online stock trading and have taken the markets to a new level. Now you can trade stocks from the comfort of your home. With just a computer and an internet connection now you can trade stocks with just a click of your mouse. Make money even at home along with your family life. This is one of the chief stock trading benefits.
You can buy stocks and then try to sell them at a higher price to make a profit or you can sell first and then try to buy them back at a lower price to make a profit. The latter process is called short selling. Short-term traders do it all the time, while longer-term investors tend to shy away from it.
Stocks are the best way to stay ahead of inflation. Historically, stocks have averaged an annualized return of 10%. That's better than the average annualized inflation rate of 3.2%. It does mean that you must have a longer time horizon. Thats way, you can buy and hold even if the value temporarily drops.
A well-diversified portfolio will provide most of the benefits and fewer disadvantages than stock ownership alone. That means you should have a mix of stocks, bonds, and commodities. Research shows that, over time, it's the best way to gain the highest return at the lowest risk.
You should also own different types of stocks. That includes large cap, mid cap, and small cap companies. The term ""cap"" stands for capitalization. It is the total stock price times the number of shares. It's good to own differently sized companies because they perform differently in each phase of the business cycle.
You should also diversify by location. Own companies located in the United States, Europe, Japan, and emerging markets. It allows you to take advantage of growth without being vulnerable to any one stock.
