The Stock Market For Beginners

Every day we get drip fed news on the latest state of play on Wall Street, whether it's been a peach for the Dow stocks, or another dark day of turbulence. This has especially been the case since the crashing stock market, two years ago, became the bell-weather for a economy about to lurch downwards. But what exactly makes up the stock market; why is it so important that it is constantly being commented on and are you in a position to enter the market and take a slice of the pie for yourself? What you need is a run-down through the stock market for beginners.

Stock Market Trading on Future Prospects

So what does the stock market do? It basically consists of a series of exchanges that allow investors to buy and sell stock in a host of publicly traded companies. Companies float stock for investors to raise money - for new equipment, expansion overseas or to pay off debts; and investors buy stock to receive income from the dividends, but also in the hope of a long term increase in the value of the stock.

The health of a stock market is tied directly to expectations about the prospects for listed companies on its exchange. If times look good and company profits are high, and predicted to remain so, then companies will be paying out lots of dividends to the holders of the stock. This is when investors pile into a market, and with higher demand, prices rise - the classic bull market.

Conversely, if the economy is on the verge of a global financial crisis, then prospects for dividends will be poor and investors will be taking their cash elsewhere for a return, selling their stock. That is when stock prices dive and the bears are said to be in charge. So it can be seen, even for stock market beginners, that the overall price of stocks is a good window on how the private sector economy is moving.

We All Hang our Hats on the Dow

As such, it is no wonder that politicians and pundits put the movement of stock indexes, such as the Dow-Jones, under such an intense spotlight. Where the Dow goes, so goes the economy and ultimately your job prospects and income levels, not to mention a politician's elect-ability.

Can profits be made from the stock market, for beginners in stock trading? The answer is a cautious, yes. The market for retail stock traders has been opened up massively over the last decade and profits are certainly there to be had, both from the bull side as well as the bear side. But new entrants need to recognize that they will be on a steep learning curve and be prepared to educate themselves about how the stock market works before wading in with bundles of capital.