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well left dot com welcome

to lessen one above the wealth livebeginning stock investing series

what he is stock investing

in this wealth live video lesson youlearn water stocks

and why does it matter why do peopleinvest in stocks

what he terms like closing price andmarket volume

actually mean

what are stocks everyone seems to havesome sort of

idea about what stocks and shares arebut let’s just be clear with some of the

terminology

a stock or share represents ownership ina piece of company

when you own a stock you own a smallpiece of a much larger company

when you see stocks bought and sold onthe stock market

your watching people buying and sellingtheir ownership shares

in different companies

the stock price if a company is thecurrent market price of a single stock

in that company every minute thousandsand millions have the stocks are traded

on a stock exchange

such as the New York Stock Exchange NYSE

or the Nasdaq

buyers put in a bid price or price theyare willing to buy the stock for

while sellers put in an ask price or

a price they are willing to sell thestock for the stock exchange brings

these buyers and sellers together

and sells the transaction all in amatter of milliseconds

when you’re putting in buy and sellorders with a stockbroker

you’ll be able to choose the minimum askprice for selling stocks

or maximum bid price for buying stocks

so you only make the trades that you’recomfortable with

what are some of the key terms

the number of stocks being traded overany period of time

is known as market volume any unusuallylarge

increase in volume is a sign that peopleare currently trading the stock

quite happily based on news orinformation about a company

the market capitalization of the companyrepresents the total value it offers to

shareholders

you can calculate market capitalizationby multiplying the current stock price

of the company

by the number of outstanding shares orthe number of stocks that the company

has issued

the market cap other company tells youits size and people invest in different

size companies based on their investingstyle

as a general rule larger more staff listcompanies have less volatility in their

stock price

but also less room to grow while smallernewer companies have greater volatility

but greater potential price appreciationthe lowest and highest price that the

stock is traded for

in any particular day is known as itsday range

the lowest and highest price a stock istraded for in the past year

is known as its 52-week range this rangequickly gives you a picture of how much

the stock price of the company

has fluctuated in the past year

why do people invest in stocks so why dopeople invest in the stock market

obviously just like buying and sellingany good that fluctuate in price

you can make money as the price of astock rises creating capital gains and

allowing you to build your wealth

what differentiates stocks from otherkinds of assets cash gold at centra

is the companies generate earningscompanies provide goods and services

and therefore generate profit whichmeans that continuously creating com

other income generating assets includereal estate and bonds

which generate rent interestrespectively these assets are contrast

it with an asset like gold

which can maintain its real value overtime and provide a safe haven

agence risks like inflation but does notgenerate

any income obviously

companies take on an amount risk ingenerating their profits

everything from guessing what consumerswant to buy

to natural disasters to securing creditto finance their business

people who own stock in companies aretherefore compensated for this risk

in the form of much higher returns ontheir money as compared to safer assets

like savings in government bonds

this is known as the risk premium

taking a look at the chart below we seethe returns on investment of ten

thousand dollars between 1964

and 2010 in four different types haveassets

stocks Treasury bonds CD savingsdeposits

n gold my 2010

an investment in stocks had turned intoseven hundred fourteen thousand

925 dollars as compared to 405,000

fifty seven dollars for gold two hundredtwenty thousand six hundred nineteen

dollars for Treasury bonds

and just 172,000 537 dollars

four-c_d_ savings account

while bonds in savings generate somereturned n gold hold its value well over

time

none of these other assets generate realearnings because

none of these other assets actuallygenerate profits

from providing a good or service

looking at the chart we can see thatcompared to these other assets

stocks are more volatile withsignificant swings both

up and down over a period of months inyears the short term swings are the

reason even experienced investors

continue to hold some of their wealth inassets other than stocks

such as cash in gold in order topreserve their wealth during times have

stock volatility

in what is known as diversification

however even with such wings

experienced investors know that thisshort term volatility

is rewarded handsomely with much higherlong-term returns

in the long run inflation or the generalrise in the price of things

means that savings accounts and othersafer assets

make you poor relative to what you canactually buy

this significant real returns you canmake through investing in stocks

are the reasons stocks are a crucialingredient in anyone’s long-term

financial portfolio

in the next well lift beginning stockinvesting less in

we look at different ways to invest inthe stock market and how to go about

choosing a stock investing strategy

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