All you’re looking for is all of the most basic information about the stock market but finding it is a tall order. Let’s take a look at some of the most basic questions that you have always wanted to know.

What is the stock market?

You’ve been to a grocery store, right? All of those items placed in one store for your convenience. Imagine if you had to go to a butcher, a farmer’s market, drug store, dairy farm, and bakery every week. The stock market is the same thing. The market brings many companies to one place so the investor can compare products using one standardized set of rules. While there are many different markets, the theory works the same for all of them.

What is a stock?

While technically it isn’t accurate to say that owning a share of stock gives you a fractional ownership in a company, it is the easiest way to think of it. A company needs money to expand, to pay debts, and to do further research. That money comes, in part, by you and I buying the company’s stock. In exchange, you participate in the growth of the company by watching your stock increase in value. While the stock doesn’t always correspond to the value of the company, it’s pretty close if you’re a long term investor.

What do investors look at when picking a stock?

This section of our stock market tutorial depends on who answers. There are two main schools of thought when trying to pick the right stock. One is fundamental analysis. A person who is a fundamentalist looks at the characteristics of a company. As an example, if a pharmaceutical company is just weeks away from having a new cancer drug approved by the FDA, the fundamentalist would see that as a reason to buy their stock. The other school is technical analysis. Technicians look at mathematical data in the form of charts. Because many larger scale investors establish exact buy and sell prices, technicians can make predictions based on past actions that are visible on a chart.

What causes the stock market to go up and down?

The answer to this question is simple: everything. Markets respond to any and all events that happen around the world. Tensions in the mid east affect oil prices, cold weather affects the price of natural gas, a poll showing that consumers don’t feel good about their finances has sent the stock market in to free fall. Other times, large scale investors can move markets up or down and sadly, illegal practices have caused false moves. For this reason, it is very difficult to predict the stock market’s movement.

What other questions can we include in the next installment of our stock market tutorial? Let us know by posting a comment.