At the very first stages of trading, no one can answer the questions of what bonds, funds, and stocks are, what technical and fundamental analyses are, how to diversify a portfolio, and why risk management is needed. In this article, we will talk about the basic concepts of the stock exchange, explain the essential principles of investment and the stock market, and also give a couple of tips for beginners. To practice the skills acquired with us, you can use the RoboMarkets platform. You just need to go through a quick registration and start your trading journey!
Stock Market: What’s Going on Here?
It all starts with an exchange where securities, futures, and other assets are traded. This is a kind of market with various goods. But you cannot join it without any effort. You need an intermediary — a broker or a brokerage platform. Brokers are licensed institutions that help you buy or sell assets by charging a commission. Imagine that you have entered the shop department you need (the stock market, for example), and an assistant (who is also a broker) will help you choose and purchase this or that product.
What Stock Exchanges Are There?
Today, there are many exchanges, such as Warsaw, London, or Moscow. But the two most popular are:
1. NYSE. It is considered the largest stock exchange in the United States and the world in general. It was founded in 1817 and now ranks first in terms of capitalization. The exchange determines the world-famous Dow Jones index for industrial stocks as well as the NYSE Composite and NYSE ARCA Tech 100 Index. The number of companies included in this exchange is more than four thousand.
2. NASDAQ is the second-largest exchange founded a century later, in 1971. The name of the exchange comes from the automatic system for obtaining quotes, which marked the beginning of the exchange. Currently, more than 3,000 companies are listed on NASDAQ.
What Can You Buy in the Stock Market?
? Shares are securities that confirm the owner’s right to a certain share in the business. You bought an Apple share, and you can proudly say to everyone that you have become a co-owner of the company. Tim Cook is your best friend now.
? Funds are a ready-made set of certain securities. The fund buys shares of various companies and issues its universal shares; you buy a share of the fund and begin to own shares in all the shares that this fund has.
? Bonds are when you lend to a company or government. Let’s take a closer look. There is company N, which needs money. You give it money, and in return, you get a bond, which indicates how much money you have borrowed, when it will be paid back, and with what percentage. This is a classic debt paper, which, in fact, represents a loan certificate.
Top-5 Tips for Beginners
- Before you start, learn to control your emotions. Trading is always a risk, and nerves can make things worse.
- When choosing an asset, pay attention to the company, its history, and the latest news. The shares themselves do not mean anything to you.
- Look for a trusted broker, consult with professionals.
- Increase your knowledge, read financial news, and be interested in politics.
- Set aside time for trading as this is a time-consuming business.
We have outlined only the most important aspects, but there are still a lot of them. Read and find out more.
