The days of hiding money under the mattress gone - people work hard for their money and their money should work for them. Savings accounts will yield interest and so will certificates of deposit, but there is a better way to get a return on money. Stock trading sounds impressive and it can yield impressive results, but it is easier to get started and to understand the stock market than many people realize. When a person buys a stock they are becoming part owner of that company and are entitled to share in the profits. A healthy stock trading portfolio can help a person build wealth without having to work every hour of the day.
The first thing to know about stocks is that there is never such a thing as a guarantee. Stocks are a risk and people can lose money as easily as they make money. For this reason it is absolutely crucial that anyone who plans to trade stocks have a diversified portfolio. Never buy only one kind of stock - no matter how good it looks at the moment. Stock trading in many different companies will help protect investors if a certain stock crashes so that they do not lose all their money.
Investors need to decide what kind of stocks they want to buy - not just what companies. Common stock is the most popular kind of stock trading - it is part-ownership in a company and allows the holder to vote on company matters. Preferred stock is also part-ownership, but it guarantees the holder a fixed dividend, or return on the investment. These shares may be purchased back by the company at any time and usually do not have the same voting rights as common stock.
How an investor trades stocks is a largely personal decision. Many casual investors will choose stocks and monitor them, but rarely trade them. Actually trading stocks on a regular basis means paying close attention to the stock market every day and being an active trader. Essentially, the value of a stock goes up when the company is doing well and goes down when the company is struggling. For instance, if a person buys a $10 stock and the company releases a new product the next day the stock could rise to $20 a share - a $10 profit for the investor with no work required. If that investor bought 20 shares, that is a $200 profit. If the company has to issue a recall and the stock drops to $8, then the investor has lost $2 and must decide whether to sell and accept the loss or to hold onto the stock and hope it rises in the future.
The last to know before investing in stocks is what risks an investor is willing to take. Some people are willing to sacrifice security for the possibility of huge profits, while others would rather have more modest returns but avoid the chance of taking a loss. The basics of the stock market investing can be summed in the popular pithy statement - buy low and sell high.