How to Learn Stock Market Facts
- 1). Read about the history of stock markets. The New York Stock Exchange (NYSE) is the largest exchange in the world, with $12 trillion in market capitalization of listed companies (of which there are more than 8,500). Some theories place China as the origin of stock markets, but Europe developed the first known stock exchanges that can be verified as the precursors to today's markets---from France to Venice to the Netherlands, where the Amsterdam Stock Exchange was born in 1602.
- 2). Research the global nature of today's stock exchanges. Although the world's two largest stock exchanges---the NYSE and Nasdaq---are American, London, Tokyo, Europe (Euronext), India and other exchanges play important roles, and there are hundreds of exchanges worldwide. The interaction of exchanges, currency issues, the standardization of many trading practices and technological innovations over the past half century have helped fuel the global economy.
- 3). Learn the language of Wall Street. Trying to learn about the stock market will be frustrating and even futile if you're not familiar with basic terminology. If terms such as bear and bull markets, dividends, stock options and mutual funds baffle you, you need pre-requisite primers on stock market lexicon. The library is a good starting point and there are hundreds of online sites that offer guidance for beginners.
- 4). Investigate the differences between stocks, bonds and mutual funds. This is a fundamental step for a stock market novice. The plethora of stock market jargon and the myriad trading options available can be mind boggling, so starting with the basics is key. Most esoteric trading strategies are rooted in stocks, bonds and mutual funds. Basically, stocks---or equities---are the cornerstone of all trading. They come in all sorts of shapes and sizes, representing all services and industries, and they are the backbone of stock market life. Bonds generally are considered safer investments than stocks because you essentially are lending money to a government entity when you purchase bonds. You buy a bond, the government uses the money for some type of public improvement, and the government promises to pay you back at a later date (with interest). Mutual funds are a collection of stocks and/or bonds (a "portfolio") offered by financial institutions as a means of diversifying your investments, usually with an eye toward retirement.
- 5). Read financial papers and magazines and learn how to interpret basic daily stock pages. Most major newspapers publish the previous day's stock market quotes, which inform readers of companies' performance. You'll need to know how to interpret ticker symbols, dividend payments and percentage yields, price-per-earnings (PE) ratios and a few other simple fundamentals. Again, books and online sites provide excellent tutorials on this basic stock market tool.
- 6). Talk to investors or people in the business. Book learning is fine as far as it goes, but nothing beats one-on-one interaction with people who are experienced in the stock market. Nearly 200 million Americans have some type of stock investment, so finding a knowledgeable source shouldn't be hard.
