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Useful Stock Market Resources
Stock Market Books
- The Essays of Warren Buffett: Lessons For Corporate America by Warren Buffett
- Buffett: The Making of an American Capitalist by Roger Lowenstein
- The Intelligent Investor by Benjamin Graham
- Beating the Street by Peter Lynch
- Common Stocks and Uncommon Profits by Philip Fisher
- Stocks for the Long Run by Jeremy Siegel
- The Four Pillars of Investing by William Bernstein
- How to Make Money in Stocks by William J O’Neil
- Reminiscences of a Stock Operator by Edwin Lefèvre
- How to Beat the Market By 6% Annually by Shailesh Kumar
- 26 Value Investing Case Studies by Shailesh Kumar
- See more of our best investment books recommendations
Stock Market Tools and Simulators
Online Stock Market Resources
- Google Finance
- The Wall Street Journal
- Personal Capital
- Learn Stock Market | Value Stock Guide
- Investment Guide: How to Value Invest? What Really Works? | Value Stock Guide
- How to Read Stock Charts | Value Stock Guide
- Stock Market Training Courses | www.LiberatedStockTrader.com
- Education Centre | ASX
How to invest in stocks when you have never done this before? Are you thinking of investing in stocks for the first time, but not sure where to start? How do you find good companies to invest in? How much money do you need to invest in stocks? How to choose best stocks to invest in? What are the best stock investment strategies for beginners?
Have you always wanted to invest in stocks, but have been put off by all the confusing jargon that you don’t understand?
Investing for beginners can be a confusing and difficult topic to understand. In this article, we will guide you through the basics of what you need to know before you start, a variety of strategies and tips to help give you the best chance of succeeding, and the myths and mistakes to avoid. After you finish reading, you’ll know where to start, have a better idea of what to expect and how you’re going to invest, and stop thinking that investing in stocks is as scary and complicated as it may sound in the stories you’ve heard.
Now, let’s get started.
Part 1: Preparing to Invest in Stocks
Before you start investing in stocks, it’s important to cover the basics to give you a better idea of what to expect and help you to make good, informed decisions.
Let’s start with the key terminology.
Key Stock Market Terms You Should Know
Of course we can’t include every term that you’ll need to know, but here are some to get you started, and we’ll explain more throughout this article.
- Balance Sheet – The financial statement which shows the liabilities and assets of a company.
- Bearer Stocks – This is the stock that is unregistered with the owner’s name.
- Bid Price – This term indicates the sale price of stocks or shares.
- Blue Chip Stocks – These are shares of big and reputed companies.
- Book Value – The net worth of the company as listed on the balance sheet.
- Bull – A person who considers the share prices in the stock market to be on the rise.
- Capital Appreciation – The increase in the value of the company and consequently its share price.
- Debenture – The stock that a company issues which are backed by assets.
- Deflation – Deflation is a period of falling prices of goods and services in the economy. This is the opposite of inflation, which is when general prices rise over time. See also: deflation economics
- Dividend – The part of the company’s profits which is usually distributed to company’s stock holders, normally on a regular basis.
- Equities – These are the ordinary shares. They are different from debenture and also from loan stock.
- Financial Ratio – Various ratios that indicate the health of a business and value in the stock.
- Initial Public Offering – The issue of new shares by a previously private company as it becomes a public company.
- Intrinsic Value – The actual value of a company or asset.
- Limit Order – This is an order to any stockbroker specifying any fixed price limit.
- Liquidation – Converting the prevailing assets to cash.
- Loan Stock – The stock that bears a fixed interest rate. It’s different from debenture stock because it’s not required to be secured by any asset.
- Portfolio – A selection of shares usually held by a person or fund.
- Risk Tolerance – The degree of uncertainty in investment returns that an investor is willing to withstand.
- Stock – Also referred to as share or equity, stock is the basic ownership unit of a company.
- Time Horizon – The length of time between making an investment and selling it.
- What are Value Stocks – Stocks that appear to be trading at a discount to their intrinsic worth, as measured by various different valuation metrics.
- Dividend Yield – The gross dividend presented as the percentage of the share price.
As a beginner investing in stocks, if you find yourself struggling to understand a term and want to learn more, here are some comprehensive lists to help you learn useful terms:
Investing for Beginners: Different Types of Stocks
Not only do you have to choose which stocks to invest in, but you also have to choose what type of stock. The two most common types of stocks are preferred stock and common stock.
Preferred stock owners are paid a fixed dividend and receive their payments before common stock owners, but they don’t have any voting rights within the company. Although preferred stock owners are given priority over common stock owners for dividend payments, common stock owners are given voting power.
There are also three different classes of common stock: class A, B, and C stock. Class A stocks are usually sold to the public, but are not as desirable as the others because they have limited voting rights. Class B stocks tend to have more voting rights, but are usually held by company management or founders. And class C stocks encourage the company management or the class B stock holders to run the company for their own benefit rather than for the benefit of the public stock holders.
Read our post What are Different Types of Stocks? for a more detailed look at the different types and classes of stocks.
7 Basic Questions to Ask Yourself as a Beginner Investor
Investing for beginners should start with understanding yourself and your risk parameters. Before you decide how you’re going to invest in stocks, there are also a few basic questions that you should ask yourself first. This step is especially important, as it will help you to make better, more informed decision later, and help you to determine exactly how much risk you are willing to – and can afford to – take.
1. What are your investment goals? In other words, why do you want to invest in stocks? What are you planning to do with the money? For example, are you saving for a holiday, for college, for a house, or for retirement? Make sure to keep in mind your investment goals, because they will affect how you make decisions when investing in stocks.
2. How is your current financial situation? Before you start investing, make sure that your current financial situation is stable, so you can support yourself and your investments, and avoid finding yourself in trouble later. You should also make sure to set aside an emergency amount of money, such as an amount to last you for at least 6 months. Just think about how much you need to have to fall back on in case your investments don’t work out or you lose your job, because otherwise the added pressure could cause you to make bad, emotionally driven decisions.
3. What is your time horizon? As we mentioned earlier, your time horizon is the length of time between making an investment and selling it. Setting this time frame at the start will help you to determine how much risk you can afford to take. For example, if you’re saving for a short-term goal and need the money soon, such as for a holiday, you can’t afford to take too many risks.
4. How much money are you willing to invest? Don’t start investing in stocks without a clear idea of how much you are willing to invest, because you could end up in a lot of trouble that way. Make sure to know your limit.
5. How much investment experience do you have? Investment experience is another important factor in determining your risk tolerance. Are you a beginner? Or do you have years of experience in stock investing? If it’s your first time investing in stocks, then you may not want to take too many risks yet.
6. Do you want a financial planner? Decide whether or not you want a financial planner. You still need to find a stock broker, but if you don’t feel confident about investing on your own, then you may need to find a financial planner as well. As a beginner investing for the first time, it helps to have an expert hand guiding your investment decisions.
7. How high is your risk tolerance? Answering the previous questions will help you to determine what type of investor you are in terms of your risk tolerance: a conservative investor who rarely takes risks, a moderate investor who finds a balance, or an aggressive investor who is experienced enough to be able to take big risks.
Learn more: do warrants expire
How to Choose the Right Stock Broker
So you’re ready to find a stock broker?
If you have never opened a brokerage account before, choosing the right stock broker can be difficult because you may not know what to look for or even what to expect. To help make the process easier for you, here are some tips and things to consider to help you find out if a stock broker is the right one for you:
- Full-service or discount broker – Decide whether you want a full-service broker or a discount broker (also known as an advisory or online broker), as this will help to narrow down your search. If you need help deciding which stocks to invest in, or want a stock broker who also offers financial planning services, then choosing a full-service broker may be better for you. But, if you have more experience and are confident in your stock market knowledge, then you may prefer a non-advisory broker.
- Verify licenses – Contact the Washington Department of Financial Institutions Securities Division at 360-902-8760 to verify potential brokers’ licenses.
- Broker-resellers – Broker-resellers are not usually considered as reputable as regular brokers, because not all broker-resellers have the necessary qualifications. So make sure to do your research and check your potential broker’s background before choosing them.
- Minimum account balance – Find out if they require a minimum account balance to be able to open an account with them.
- Fees – Look for the lowest fees, but make sure that the quality is still high. Keep in mind that full-service brokers charge higher fees because they offer more services and support.
- Terms and conditions – Check their terms and conditions. It’s important to know if there are any specific requirements or other fees. For example, they may charge fees for inactivity, account maintenance, or not maintaining the minimum account balance.
- Trading fees – These are the fees that they charge for every trade you make. Check how much they are before choosing a broker. Look for reasonable fees, but keep in mind that lower fees may not always be the better option because they usually mean that the service and support is not as high quality.
- Broker-assisted trading fees – These are the fees that brokers charge if you want them to make your trades for you. Avoid these if you can because they are more expensive.
- Withdrawal fees – Check if there are withdrawal fees. Some stock brokers will charge you if you withdraw from your account.
- Margin account – With this type of account, you borrow money from the stock broker to buy stocks. Avoid this type of account if you’re a beginner.
- Level of support – How much support is available? Would you prefer calling them for help, or being able to meet them in person? It’s important to find out how much support they offer, and what kind, especially if they’re an online stock broker.
- Extra benefits – Look for stock brokers who offer extra benefits. You shouldn’t base your decision solely on this, but it’s worth looking out for.
- Potential brokers – When you have a shortlist of potential brokers, make sure to discuss your investment goals with them before choosing one. Consider all of your options first.
Part 2: How to Invest in Stocks
Now that you’re ready to start investing in stocks, let’s take a look at the different strategies for investing in stocks. We’ve also provided further reading material to help give you a more in-depth look at each strategy.
11 Strategies for Investing in Stocks – Stock Investment Strategies for Beginners
1. Value investingValue investors buy stocks when they sell at a discount to the intrinsic value of the company. In other words, they buy undervalued stocks. This strategy was popularized by Benjamin Graham and David Dodd in their 1934 book Security Analysis.
- What are Value Stocks?
- Easy Way to Understand What is Value Investing
- Fact, Fiction, and Value Investing
- Value Investing: Investing for Grown Ups
- Value Investing: Do or Do Not… There is No Try
- Value Investing – Why You Fail?
2. Growth investing
Growth investors focus on the growth of their capital by investing in growth stocks, which are stocks in companies with the potential for above-average growth. This strategy is based on capital appreciation, rather than dividend income, so it can be quite risky.
- Introduction to Growth Investing
- A Buffet Approach to Buying Growth Stocks
- Growth Stocks and Mutual Funds to Invest In
3. Income investing
Income investors choose stocks from companies that have steady streams of income.
- How the Income Investing Strategy Works
- Why Income Investing Works
- Stock-Picking Strategies: Income Investing
4. Momentum investing
Momentum investors focus on choosing stocks that have had high returns and are moving significantly in one direction.
GARP stands for Growth At A Reasonable Price. This strategy combines growth investing and value investing, as GARP investors choose stocks from companies that are undervalued but still have the potential for significant growth.
- Stock-Picking Strategies: GARP Investing
- Growth at Reasonable Price (GARP) Investing Strategy
- Want Growth and Value Shares? – Try the GARP Investing Strategy
- What is the GARP Strategy and is it Right for You
- GARP: Everyone Wants It, But Few Funds Hit the Mark
This strategy describes any process that involves investment decisions being made based on how well the company is doing. In other words, the idea that if the company does well, then the stock price will also do well.
7. Technical Analysis
Technical analysis, also known as behavioral investing, is based on psychological research and studies the supply and demand in stock markets.
More detailed information on technical analysis follows later in this document
- How to Make Money in the Stock Market
- Technical Analysis: Introduction
- Does Technical Trading Really Work? Technical Analysis 101
Other General Strategies:
8. Choose your stocks wisely
In other words, avoid relying on speculation to choose your stocks. Speculation is when you make stock investment decisions on a whim or because many others are making the same decision. Don’t just think that because everyone else is doing it that you should do it as well.
9. Know when to sell
Of course choosing stocks wisely is important, but knowing when it’s the best time to sell them is also important. Check out our article When to Sell Stocks – 9 Different Situations for advice on when you should sell your stocks.
10. Learn deflation investment strategies – just in case
Check out our article How to Invest During Deflation for tips to help you understand how deflation can affect the stock market.
11. Find a mentor
Having a mentor who you can go to for help is especially great for new stock investors.
12. Learn from the best stock investors
Learn from successful investors such as Warren Buffett, Benjamin Graham, Peter Lynch, and Jeremy Siegel. Check out Part 3 of this article for recommendations for books that these investors have written.
Part 3: How Not to Invest in Stocks
Knowing how not to invest in stocks is also important, especially for those who want to avoid common investing myths and mistakes that new stock investors tend to make. Here are some examples to help you avoid them:
5 Myths You Should Stop Believing
1. Investing in stocks is the same as gambling – This is one of the most common myths. Of course there is still risk involved, but, as you know from reading this article, investing in stocks is clearly not the same as gambling.
2. Only wealthy people can make money from stock investments – This is not true. You don’t need to have excessive amounts of wealth to be able to do well in the stock market. With the right stock broker and an effective investment strategy, you have just as much of a chance as wealthier investors do to become successful stock investors.
3. You can invest in stocks easily if you’ve already made other investments before – Just because you’ve made other investments before doesn’t mean that you know everything you need to know to invest in stocks. Make sure to do all of your research first, and consider hiring a financial planner to help if you don’t have the time or necessary knowledge to do it all on your own. Keep in mind that paying for a financial planner may be expensive, but it will cost you more if you start investing in stocks without having a solid understanding of how to do it.
4. Stocks that go up will eventually come back down – This is a myth because it doesn’t happen all the time. Sometimes stocks will stay up, and those who believe this myth may not have profited from it because they expected that it wouldn’t last.
5. You must always buy stocks when they’re low – Many investors, especially new ones, believe this myth. Keep in mind that even if you were to try to buy low and sell high, you still need to do your research so that you can make an informed decision based on more than just how low the cost is.
5 Mistakes to Avoid
1. Making emotionally-driven decisions – Don’t let emotions such as fear and greed influence your decisions when you invest in stocks. If you do, you will only increase your stress and be more likely to make poor decisions, so make sure to not exceed your risk tolerance. This is why determining your risk tolerance before you start investing is especially important, as it will help you to avoid this mistake.
2. Confusing cheap for being good value – Cheap doesn’t always mean better value. For example, a cheap stock broker has less fees, but they may not offer the high quality services and support that you may want.
3. Allowing herd mentality to influence your stock investment decisions – Don’t think that just because everyone else is doing it, you should as well. Herd mentality is quite common in stock investing decisions, so check out our article on Herd Mentality: Are You Being Set Up to Fail to make sure that you’re not making this mistake.
4. Rushing into decisions – If you’re still doing research and are not completely ready to buy stocks, don’t buy them. Even if something changes and it seems like you will miss a big opportunity if you don’t buy them now, you should still wait. Rushing into a decision before you’re certain that it’s the right decision could cause you more trouble later.
5. Protecting your bad choices – Don’t let loss aversion make you want to protect your bad choices. It may seem obvious that once you make a bad choice, you should fix it, but loss aversion makes investors feel that avoiding more losses is preferable to acquiring gains.
New stock investors often make mistakes because they look in the wrong places for investment advice, and don’t make the most of all the resources and tools available to gain an advantage.
So, we’ve gathered a list of the best resources for new stock investors, including books by some of the most well-known and successful investors, as well as online resources, tools, and simulators to test your skills. Check them out below – you’re sure to find something useful.
Part 4: Stock and Commodity Exchanges Around the World
Stock and commodity exchanges are exchange markets that are open platforms allowing sales and purchases of stocks and other financial products such as commodities and futures. This is a complex platform including derivatives and futures transactions. The stock and commodity exchanges provide many people and organizations investment tools to build wealth. These platforms also provide a worldwide marketplace for those selling stocks and commodities such as agriculture and precious metals.
Stocks are considered equity shares or owning a share or piece of a company. This type of ownership is known as equity ownership, in other words, owning a piece of a corporation’s equity. The corporation raises capital by selling units or portions of the company and its profit to shareholders. In turn, those who purchase these units are partial owners of the corporation.
History of Stock Exchanges
There are many debates between scholars regarding the first appearance of a stock market or exchange in history. Many scholars date the first occurrence of a stock exchange back to ancient times. Writings have been found claiming Roman stock ownership of government leases was very common around the 2nd century BC. The history of the modern stock exchange has been traced to The Dutch East India Market in the very early 1600s. This eventually led to the London Stock Exchange which was the model for the largest stock exchange today, The New York Stock Exchange, Listed below are great informational guides to the history of the world’s stock exchanges:
- Ancient versions of a stock exchange: Ulrike Malmendier, a well respected economist debates the existence of an ancient version of the stock market in Rome in a detailed 44 page paper written for Yale University.
- The First Modern Stock Exchange: The Dutch East India sold its first shares in 1602 making it the first modern stock exchange.
- History of the US Stock Exchange: Signing the Buttonwood Agreement in 1792 was the beginning of the US Stock Exchange.
- Stock market crash 1929: This was the beginning of a ten year depression in the US and the crash affected the worldwide financial market.
- World Stock Exchange Today: The World Stock Exchange is an association comprised of 52 exchanges around the world.
There are many stock market terms when discussing stocks and the stock market that have specific meaning in the financial and investment world. Understanding the meaning of these key terms will help define the concepts when learning about the stock market. There are many terms that have different meanings outside the financial arena. It is important to know the meaning as it relates to the stock market.
- Bonds: Offers information on the different types of bonds and their markets.
- Dividends: Outlines the functions of cash and stock dividends and what the ramifications of each can be on shareholders and corporations.
- Enterprise Value: Provides descriptive meaning of enterprise value, formula for calculating the enterprise value of an organization, and when this is used in the stock market.
- Stock Valuation: The purpose of valuing stock can be beneficial to both the shareholder and corporation based on current and future performance.
- Asset Allocation: A description of asset allocation and a guide to how this can reduce risk.
Why Do We Need Stock Exchanges
A stock exchange provides a platform for buyers to purchase stock from many different companies while this exchange platform offers a marketplace for sellers to find buyers to purchase their stock in a relatively short amount of time. Without a stock exchange, buyers and sellers of stocks would reply on other archaic methods such as classified advertisements, which offer limited exposure to potential buyers and sellers. In short, a stock exchange provides an easy solution for all entities involved. There is a dynamic benefit for everyone involved in this type of marketplace including the economic well being of countries.
- Why do We Need the Stock Exchange: Provides an insight into why we need the Stock Exchange and the benefits these types of platforms provide to the financial health of the world.
- Why do we need a stockbroker: Provides steps to finding the right stock broker or investment professional.
- Benefits to Buyers and Sellers of Shares: Stock markets allow buyers and sellers of stock to connect through a stock market and make transactions that would otherwise not be an option.
Stock Exchange Guide: Five Major Stock Exchanges in the World
The world’s five largest stock exchanges account for the majority of the globe’s financial transactions. These five major stock exchanges have seen many changes in the past with mergers and growths. The leaders in the world’s financial sector include the United States, Japan, the United Kingdom, and the People’s Republic of China. There are many active stock exchanges around the world with a smaller number of companies listed who have a lower overall market capitalization compared to the five largest exchanges world-wide.
- New York Stock Exchange (NYSE): The largest stock exchange in the world, the NYSE has been traced as far back as 1792.
- NASDAQ:An American electronic stock exchange which opened in 1971 and was the world‘s first electronic stock exchange.
- Tokyo Stock Exchange: Originally open in 1878 as a way for the government to trade bonds but currently operates as one of the worlds largest stock markets.
- London Stock Exchange: Trading began in a coffee houses in London during the 17th century and led to the opening of the London Stock Exchange.
- Hong Kong Stock Exchange: Originally established in the 1800, Hong Kong Stock Exchange merged with several other exchanges and has had the most growth since the 1986 mergers.
Process of a Company Being Listed on an Exchange
In order for a company to be listed on a stock exchange, basic requirements must be met. Each stock exchange has their won individual requirements however there are common requirements between most major stock exchanges. Each requirement must be met before a company is listed. Once listed on a major exchange, shares are available for purchase.
- Application for Listing: Once the eligibility of a listing is determined, the application process begins.
- Minimum Requirement for Market Capitalization: There are different minimum market capitalization requirements for each stock exchange. Offers a sample of what NASDAQ requires.
Commodities Exchanges are for investors and commodity buyers go to purchase futures, derivatives and commodities for trading or profit. There are a wide variety of raw materials, such as coffee, cotton, and oil, across the world’s commodity exchanges. While investors can buy shares in a company on a stock exchange, for example oil stocks, on a commodity exchange investors are able invest in the actual commodity, such as oil, directly. Commodities exchanges have been in existence as far back as history can tell. Contracts for these exchanges are what sets the modern exchange apart from the historical exchanges.
History of Commodities Exchanges
During the early 12th century merchants began making contracts for futures similar to what is available on the commodity exchanges today. The purchases were made by the buyers before the goods were delivered, thus ensuring a sale when traveling with large loads of commodities along dangerous routes. This would lower the risk of traveling the dangerous route by ensuring the sale. Before the futures contract were implemented, the risk was oftentimes much too high.
- Ancient Sumerian Trade Contracts: During the early Bronze Age, Sumerians would trade sheep pigs, and other commodities. This was their currency, and oftentimes these early traders would create contracts for future trades.
- Chicago Mercantile Market: A brief history on the Chicago Mercantile Market, which was originally called The Chicago Butter and Egg Group.
- Regulators of Commodity Exchange Market: Established organization in 1974 that regulates the Commodities Exchange in the US to protect the public from fraud.
Commodities Key Terms
There are many terms used in commodities that are essential to understanding the basis of the commodities industry. Understanding the key terms used in commodities will give a broad introduction to commodities. These are specialized terms found in phrases unique to this industry.
- Commodity: Offers understanding of commodities and glossary of terms in the commodities industry.
- Raw Materials: A list of links that provide information on raw materials and their supply and demand models as well as price indices.
- Intercontinental Exchange: A global market operating internet based trades in the futures market
- Charting: Explanation of terms such as charting, which is a technique of analyzing price movement.
Examples of Commodities
Commodities are essential products that are natural substances the earth produces. They consist primarily of raw materials. Particular commodities are traded or sold when there is a demand for them. The demand is typically what drives the price for a particular commodity.
- Grains: Includes information on the different types of grains and basic commodities marketing for grains.
- Gold: Commodities market for gold and market price determinations.
- Nickel: Article explaining the evaluation and pricing of the worth of nickel.
- Silver: Latest silver news and pricing information and financial trends.
- Copper: Statistics and information about copper include pricing on commodities exchanges.
- Cotton: National Cotton Council of America offers latest cotton futures and activity in the cotton industry.
- Crude Oil: Weekly view of crude oil and its worldwide performance on the commodities exchange.
- Coal: Provides information on the commodities trading of coal.
Five Largest Commodity Exchanges Around the World
Commodity exchanges began as paper contract transactions. Modern day commodities exchange markets have developed into a complex market. The world’s largest commodities exchanges deal in trillions of dollars of exchange commodities. The highest performing and largest worldwide commodities are listed below.
- New York Mercantile Exchange: The world’s largest physical commodities exchange dealing in futures.
- London Metal Exchange: Offers an exchange platform for metals such as gold, silver, aluminum and copper.
- Chicago Mercantile Exchange: The first US commodities exchange market. The Chicago Mercantile Exchange is still one of the world’s largest commodities platforms.
- Chicago Board of Trade: Founded in 1973 as the first US options exchange, Chicago Board of Trade has a complex trading system and is still a world leader in options trading.
- Shanghai Metals Exchange: This is the largest metal exchange in China and one of the largest in the world.
Part 5: Starting Early: Investing for Teens
Saving money for retirement and other important expenses as you get older can be difficult, especially when you’re trying to live it up during the teenage years. When we are young, thinking about our monetary situation for the future is often the last thing on our minds. Having enough money to get through your golden years and take care of your family is definitely something you will be concerned about as you get older. The fact is, the sooner you start investing in stocks, the more money you’ll have to live on as you age. There are many different forms of investing, and most of them can offer you a great return if you do it wisely. While investing for teens can be a bit intimidating, it’s important to understand the various types of investments available and what you can hope to gain from them.
Stocks and bonds are one of the most popular forms of investing. Simply put, you purchase stocks and/or bonds on stock exchanges, and they can later be sold at a profit, which is yours to keep. The younger you are, the more diversified, or different, your stock portfolio should be. Younger people can take higher risks because they still have time to re-invest if something goes wrong. The higher the risk of any kind of investment, usually the greater the return will be. Bonds are similar to stocks except that a bond is more like a small loan being given to a person, corporation, or government project. Over time, the bond earns interest and when it has lived out its full investment life, you reap the return of the interest that has been accrued on the amount of the bond. Whether you decide to work with stocks or bonds, it’s always a good idea to enlist the help of a professional who can help guide you through the steps of purchasing and selling stocks.
Another well-known and popular form of investing is known as an IRA account. An IRA account is also known as an Individual Retirement Account. This form of investing is usually begun once you have a job that offers some kind of 401(k) plan. You can fund an IRA with your own money, or your company might contribute. If you do not have a job, you can still start an IRA and then continue the investment process once you enter a career. Many companies will match your contributions or help contribute a certain percentage of your overall contribution each month. The two main IRA types are traditional and Roth. They differ because of how the money is taxed, and it is a good idea to find out the terms of an IRA before you decide to invest in one. This kind of investment is easy and there is very little to no risk involved.
There are many other types of investing you can try, and each one has its own fine print, so always ask questions before you do anything with your money. Try out a few virtual stock market game to get a good feel for what dealing with stocks is like. Just saving money is great, but it does not offer much, if any, profit like an investment can. Being patient is the key to seeing the benefits of an investment plan, so remember that while it seems like you’re giving your money away at first, it will be well worth it in the end when you get that final return on all of your hard work and money invested. Not only will you have money for the future, but investing can be fun as well. Check with your parents and find out if they have already started some kind of investment plan for you. If so, you can always contribute to that and watch your money grow over time.
Resources to Start Investing in Stocks for Teens
Before you start investing in stocks, you need to educate yourself about the investment process. It is as easy to lose money investing in the stock market as it is to make money in stocks. For more information about smart investing, please refer to the following websites:
- The Teen Years: Investing
- The Mint: Investing Tips for Teens
- Virtual Stock Exchange
- Basics of Stock Market and Exchange
- How Much Money Should I Invest?
- Five Tips for Young Investors
- Beginner’s Guide to Investing
- Teen Investor Resources
- Practical Money Skills for Life
- Virtual Stock Exchange Games
- Resources for Money and Investing
- The Young Investor
- Putting Teens on the Retirement Fast Track
- The Magic of Investing Early
Part 6: Stock Market Game
Stock market game and simulations allow students a valuable and fun opportunity to learn all about the process of making good investments and begin a good foundation for sound money management. These games are designed not only to be used in mathematics and economics but also give valuable lessons in social studies, language arts, technology and even science classes. It helps students expand their knowledge and gain new skills in investing, saving, communication, cooperation, research and decision making.
Youth Benefits of the Stock Market Game
The main benefit of the stock market game is that students who take part in it earn higher scores on personal finance exams than those who do not play it. More than one learning style is encouraged as both students and teachers become acquainted with the rules of the language of saving and investing money. Students are also able to carry out their own research at a comfortable level as teachers get to customize classroom lessons. Being a team-based learning exercise, it also allows cooperation on each part of the student. Along with classroom learning activities is the use of interdisciplinary teaching to extend the growth of a portfolio in online simulated securities trading as it allows students to use their research done online.
In order to learn the ins and outs of investing in the stock market, students research can be done through the internet, magazines and newspapers. For classrooms without internet access, a toll-free fax machine is used. It is advisable that there are fewer students on each team so each student can interact more with the simulation. For seven days a week and at any time of the day or night, classes are able to trade.
There are two popular stock market games for high school students across America. These are the Stock Market Game and the National Stock Market Simulation. These games are played using virtual money as each class needs it to make simulated sales and purchases of stocks plus mutual funds and bonds. There is a specified amount of time to complete the classroom portfolio.
The Stock Market Game exposes students within smaller budgets to increased educational standards. Meanwhile, the National Stock Market Simulation runs for 10 weeks which allows classes to ask orders for U.S. stocks and make real-time bids. Each student can view their performance as well as ranking in real time as there is a streaming portfolio update. According to Stock Market Simulations, both students and classes can use market, stop and limit orders while they play.
Students with the largest total equity in their portfolio at the end of a session are the winners. Prizes are usually awarded to the top three preforming teams. Rewards range anywhere from actual stock market shares to dinner certificates to T-shirts and trophies.
Stock Market Game Resources for Teachers
- Stock Market GameTM: A very popular and free stock market game from Wall Street Survivor to learn and practice investment planning under real market conditions with a $100,000 in simulated starting capital.
- TeachNet: The Stock Market Game: Includes five lesson plans in conducting a modified stock market game.
- The Good, The Bad and the Ugly (link inactive): An integrated math/history lesson plan that gives emphasis on The Stock Market Crash.
- The Capital Market: An online quiz about the Capital Market.
- Who Owns McDonald’s?: An interesting lesson plan to introduce students on the concept of being owners of a business through purchasing stock.
- The New York Stock Market: Includes information about the New York Stock Market which opened on Wall Street on January 4, 1865.
- Your Chance to Make Millions in the Stock Market: A three-part lesson plan that takes students through an interactive historical simulation and investments decisions.
- The Crash of 1929: Includes historical information on “Black Tuesday” wherein almost 31 points was lost in the Dow Jones Industrial Average.
- Investment Risk Tolerance Quiz: A quiz developed by two university personal finance professors to contribute to a study on measuring financial risk tolerance.
- Great Nebraskan National Economics Test: An online quiz to measure basic economic principles and facts.
- Understanding Portfolios: This quiz on how to build your portfolio measures how well the students understood the lesson.
- The Balance Sheet and Market Indexes: A quiz in Foundations of Business Administration made by Prof. Bauer-Ramazani for freshman college students.
- The Stock Market Game(TM): A site where students can log-in and learn about stock markets while playing.
- Can You Be the Next Market Guru? (link inactive): An online flash game wherein students can learn how to make money in stocks by investing in imaginary stocks.
- Fed Chairman Game: An online game where students have the chance to take charge of a simulated economy.
Stock Market Game Resources for Students
- simCEO: An online simulation game where students can create their own companies.
- FDIC Learning Bank: A site dedicated to give comprehensive information on the Federal Deposit Insurance Corporation.
- Math in Daily Life: A comprehensive look at how math affects students.
- NYSE Made Easy: An article to help students learn simple terms associated with the New York Stock Exchange.
- Feed the Pig: A site to learn how to take control of personal finances.
- What is the Stock Market?: Gives an overview of what stock market is.
- Economic Articles for Students: A list of websites students can use to keep up with the economic news and concepts.
- What’s Up with Wall Street?: A page dedicated to learn the basics about Wall Street.
- The Hows of Taxes: Includes 14 modules to give students a background on tax concepts.
Photo by: Lance Ball
Part 7: The Great Depression, Stock Market Crash and Beyond
What Caused the Great Depression?
The world seems to be crashing on you and there is no place to run. This could be a description of what people felt during the Wall Street Crash of 1929 (October 1929) which was also called as the Great Crash, and the Stock Market Crash of 1929. This disaster was the start of the Great Depression, which lasted for 12 years and ended at the onset of World War II in 1941.
Stock Market Crash of 1929
October of 1929 saw the collapse of the stock and commodity market, which obliterated 40 percent of the value of common paper stock, decimating the investment portfolio of many. This represented only a single happening as the tragedy continued and more and more people became penniless, which rendered them helpless in providing for the needs of their families. Folks were pleading for money and food for their children as they aimlessly roamed the streets. Multitude of businesses was closed and banks were declining. By 1932, an average of one out of four Americans were unemployed. Despair and hopelessness were mirrored on the faces of the people for they saw no hope in sight as all kinds of bad news filled the air.
The Great Depression and the New Deal
In response to the devastating effect of the Great Depression, a series of economic programs was adapted by the US in 1933-36. Called the New Deal, the program was enacted by Congress during the 1st term of President Franklin Delano Roosevelt (1933-37). It concentrated on the 3 Rs: relief, recovery and reform. It means relief for the poor and the jobless, recovery of the economy back to normal and reform of the financial system to avoid depression and encourage people to invest in the stock market again.
Aside from the 3 R’s, the New Deal started a political realignment which made the Democratic Party the majority. This party based its platform on liberal ideas, big city machines and empowering the labor unions, ethnic minorities and the white South. Some of the opposition Republicans supported the program while others were non-supportive claiming that such program is destructive to business and development.
- 3 R’s of the New Deal
- Mythology of the New Deal
- Great Depression and the New Deal
- Was the New Deal Successful?
Unemployment During the Great Depression
By the time that Franklin Delano Roosevelt was inaugurated as President in 1933, one fourth of the entire American population was unemployed. Consumers’ confidence was low due to the stock market crash; they stopped purchasing goods from factories and low production led to workers’ mass lay-off. The jobless had almost no money left to spend leading businesses to gradually decline. At the peak of the Great Depression, there were more than 13 million people unemployed. More and more people rely on the government and charity to feed their families.
Measures to remedy unemployment:
1. The Civilian Conservation Corps (CCC) offered young men between 18 and 25 years to work in camps administered by the army.
2. A Public Works Administration (PWA) gave employment for skilled construction workers on a wide variety of projects.
3. The Federal Emergency Relief Administration (FERA) distributed direct relief to hundreds of thousands of people, usually in the form of direct payments.
- Unemployment during the Great Depression
- Unemployment during the Great Depression
- Why Unemployment in the Great Depression?
Agriculture was greatly affected during the Great Depression. After the massive crash of the stock market, prices were declining very fast. In the spring of 1933, the agricultural sector was on the verge of disaster. In the United States, 25 percent of farmers and 37 percent of all nonfarm workers were completely jobless. Some people had nothing to eat; many others lost their farms and homes. Homeless individuals climbed aboard freight trains that were crisscrossing the nation. Cotton farmers dispossessed of their farms; packed their bags and drove their dilapidated Model Ts all the way to California hoping that the posters about plentiful jobs were true.
Some measures introduced:
1. Agricultural Adjustment Act (AAA) gave economic aid to farmers.
2. Commodity Credit Corporation purchased goods to be stored until prices will rise.
3. Soil Conservation Service was another government agency providing relief to farmers.
The Great Depression transformed the lives of people who lived and farmed on the Great Plains altering America’s way of life. Government funding was available to help displaced people endure the Great Depression; however, what took place altered the future of agriculture for years to come. Some government programs helped them to live through the 1930s but this changed affected the future of agriculture forever. Farmers have to contend with the dust, insects, heat of summer and cold of winter. Families are deprived of heat, light, indoor bathrooms and other facilities; and the necessity of raising their own food.
In the ‘40’s, 2.5 million people left the Plains states, which was marked as the biggest migration in American history. They consisted of farmers, professionals, retailers, and others. Eventually, they were competing for seasonal job with very low pay. Many ended up performing seasonal jobs like picking crops at extremely low wages. By 1940, nearly six million farmers were receiving federal subsidies.
Industry and Labor
Industry suffered with the economic crash of 1929 to 1932. In the United States, the indicator of industrial production dropped from one hundred in 1929 to fifty-five in 1932, the largest plunge compared with all previous industrial economies. During 1930, President Herbert Hoover motivated industrialists to maintain wages, to schedule working hours, and to provide an investment plan to tide workers during the expected short duration of the recession
Some measures created were:
1. In 1933, The National Recovery Administration (NRA) was established and with the help of the National Industrial Recovery Act (NIRA), tried to control heated competition by establishing codes of fair competitive practice to produce more employment and encourage more buying.
2. The NIRA secured the right to bargain as a collective group through the use of labor unions to represent the individual workers.
3. National Labor Relations Act disallowed employers from unfairly interfering with union activities; with the National Labor Relations Board which supervises bargaining and negotiation of the organization, the election of organization administrators, and makes sure that workers have the right to choose the organization that represents them in dealings with employers.</p>
The Second New Deal
In the economic planning aspect, the First New Deal was inadequate so the government and the private sector deemed it necessary to move to the Second New Deal. This program was a compilation of legislation in 1935 focusing on the goal of economic security for all.
Some relevant points of the Second New Deal are:
1.Emergency Relief Appropriation Program Act which required government to be more aggressive in giving employment, to be labor intensive, pay a security wage and not compete with the private sector. It also created these acts: Rural Electrification Administration, National Youth Administration, Resettlement Administration and Work Progress Administration.
2. Social Security had better and more workable plans added.
3. Wagner National Labor Relations Act extended long term security to labor. It was described as the balance of power between American capital and labor.
Despite the serves of legislative initiatives, the Depression continued. To relieve the pressure, President Roosevelt proposed a new set of economic and social measures intended to fight poverty, create more work for the unemployed, and provide a social safety net.
- Summary of the Second New Deal
- New Deal Cultural Program
- Second New Deal Program
- Roosevelt and the New Second Deal
A New Coalition
Roosevelt won a second victory in 1936 over his Republican opponent. Taking 60% of the votes, he was able to form broad new coalition with the Democratic Party, labor group, farmers community, urban, ethnic, Afro-American and the traditional Democratic in the south. The republican was supported by the business and middle class citizens from small towns and suburbs. His formidable political alliance withstood several decades.
The years from 1932 to 1938 was marked with widespread public debate on the relevance of New Deal policies to the nation’s political and economic life. The citizens wanted the government to assume the responsibility for the welfare of ordinary people. The New Deal laid down the foundations of the modern welfare state in the United States and President Roosevelt, had established a new standard of mass leadership. At the onset of World War II, the Great Depression came to its final end.
- New Deal Coalition of Franklin Delano Roosevelt
- FDR’s New Deal Coalition
- What Ended the Great Depression?
Miscellaneous Resources: Refer to these links for more insights about The Great Depression:
- Interesting Facts about Great Depression
- Timeline of the Great Depression
- A Photo Essay
- Social Effects during the Great Depression
Image: Wikimedia Commons