Until recently, investing in the stock market was not something "average" people did to increase their wealth and savings. Investing in stocks was something only the very wealthy could afford to do. Investment firms and stockbrokers charged high fees and commissions, draining modest accounts of any profits. With the introduction of online trading platforms and discount brokerage forms, as well as the wide variety of financial information available online and on television and the radio, anyone with some money can invest in stocks, bonds, and mutual funds. While many investors utilize and leverage the information and analysis available when they invest with a full service brokerage form, many investors opt for a less expensive alternative; and, with the some basic information, they can be just as successful as the professionals.
First, you need to understand that a stock represents your share in the ownership of the company and it is your claim on any future earnings and dividends. Buying stock in a company shows that you are interested in its long-term success. Profits are eventually paid out in dividends, and the more stock you own, the more dividends you receive. Choosing a successful stock means that an investor should have a basic understanding of basic business principles and models.
Investors should pay attention to earning statements, sales numbers, debt, and equity, and be familiar with annual reports, quarterly reports filed with the Securities and Exchange Commission (SEC) and any third party publications like the Wall Street Journal. There are a number of sites dedicated to providing research and analysis into the stocks trading on any of the major market exchanges.
Once you have decided to invest, you should understand how to read a stock quote, so you can make informed decisions about buying or selling your stock. The price of any stock is quoted on an exchange (like the New York Stock Exchange or the Japanese Nikkei). A basic quote for a stock provides information about the stock's activity, like bid price, ask price, last traded price, and volume traded.
Many online sites provide more detailed information about the stock. This information helps the investor see a bigger picture.
• 52 Week High and Low: The highest and lowest price at which the stock has traded over the past year. These are the first two columns in a stock quote, and generally don't include the previous day's trading.
• The third column indicates whether the stock is general or preferred stock.
• The Ticker symbol is identified in the fourth column.
• Column 5 notes the dividend paid per share. If the column is blank, the company is or does not pay dividends. This information is followed by the dividend yield, the percentage return on the dividend.
• Price to Earnings Ratio (P:E) is an important figure for investors. It represents the stock prices divided by the earnings per share and a healthy P:E represents a solid company.
• The trading volume shows the number of shares traded for the day.
• The Daily High and Low identifies the highest and lowest prices paid during that trading session.
• Column 11 shows the price at which the stock closed for the day. If the closing price is up or down by 5% or more, the closing price will be bolded.
• The net change shows the dollar value change in the stock price from the previous day's price.
Before executing a trade, it is important to get a real time stock quote. Most free financial sites and online resources provide a delayed stock quote, which may be as old as 20 minutes. Brokers have access to real time quotes, as do investors who subscribe sites with members only areas.
Written by Samory Borry
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