Why there are so little billionaires on the world? What is that they understand and we don’t? Well, just one of many is stock-market. Everybody knows that if you buy a stock and company become more successful you can sell it and gain profit. But how stock market really works? Here is the answer, as Howstuffworks say:
“For a new investor, the stock market can feel a lot like legalized gambling. “Ladies and gentlemen, place your bets! Randomly choose a stock based on gut instinct and water cooler chatter! If the price of your stock goes up – and who knows why? – You win! If it drops, you lose!” Isn't that why so many people got rich during the dot-com boom -- and why so many people lost their shirts (not to mention their retirement savings) in the recent recession?
Not exactly. But unfortunately, that's how many new investors think of the stock market – as a short-term investment vehicle that either brings huge monetary gains or devastating losses. With that attitude, the stock market is as reliable a form of investment as a game of roulette. But the more you learn about stocks, and the more you understand the true nature of stock market investment, the better and smarter you'll manage your money.
The stock market can be intimidating, but a little information can help ease your fears. Let's start with some basic definitions. A share of stock is literally a share in the ownership of a company. When you buy a share of stock, you're entitled to a small fraction of the assets and earnings of that company. Assets include everything the company owns (buildings, equipment, trademarks), and earnings are all of the money the company brings in from selling its products and services.
Why would a company want to share its assets and earnings with the general public? Because it needs the money, of course. Companies only have two ways to raise money to cover start-up costs or expand the business: It can either borrow money (a process known as debt financing) or sell stock (also known as equity financing).
The disadvantage of borrowing money is that the company has to pay back the loan with interest. By selling stock, however, the company gets money with fewer strings attached. There is no interest to pay and no requirement to even pay the money back at all. Even better, equity financing distributes the risk of doing business among a large pool of investors (stockholders). If the company fails, the founders don't lose all of their money; they lose several thousand smaller chunks of other people's money. “
Of course this is loot complicated in reality, and there are many, many things that are kept as a secret. So our guys understand this completely, actually some of them made this. You can even say that this is some kind of art. Naturally there are a few Myths. Four most known are:
1. Stock market investing is gambling
Of course not, buying stocks is complicated and well research job. You don’t buy a stock just because you like the name of company or you see it is expensive. To know how to buy a stock that can make you a profit, you must understand how stock market works. Then you must understand that company (what it does, who made it, what are future plans and etc.). Some of the companies even cheat. Company can survive even without profit. Using expectations of future profit. But this can fool around some minor brokers for short period of time.
2. Stock market is place for rich people only
In history it was like that. Because only a small number of people had opportunity to go on college and have some start money so they can buy stocks. But today everybody can be a broker. You can buy stocks from your house using Internet. Some of best places to do this are:
Even tool that really brokers use are available to you. So any who like this, and have opportunity can start making money, or losing…
3. Fallen companies will rise again
For this topic Wall Street has its own proverb “Those who try to catch a falling knife only get hurt.” For an example, if we have two companies.
One is famous and richer, but its stock fall from $40 to $10
Other one has made profit from $5 to $10.
Which to buy? Many new brokers and inexperience’s buyers will choose first company, believing that it will rise again and make them profit. Believe or not it is a sin on Wall Street. Company that fell like this usually they don’t recover. They can use cheat as I explain earlier, but it is just for a short time. You always buy stocks that are going up.
4. Every stock must come down
Again no. Some stocks go up and stay there. If a company is successful and make good profit, they can even go up and up. Real question is where to find that a company. Many advisers’ subject that companies working on development of AI (artificial intelligence) and robots are going to be giants of the future.
In 2014 the most expensive stocks are: