There are many people who prefer to invest their money in stocks, because of the many success stories that they have heard from different stock investors all over the world. But just like any type of investment, there are many risks involved in stock investing as well. In fact, even more risks are involved with stock market compared to any type of investment — but bigger rewards also await the brave and the wise.
When one invests in stocks, he must trade stocks. Stock trading refers to the buying and selling of stocks in the financial market. Usually, this occurs on the exchange floor of the stock market, where people are seen yelling, waving, and gesturing at one another while they buy and sell stocks. This is where an investor will look for the best stocks to buy, and approaches a stock broker to make the arrangements needed. The stock broker will then alert the floor clerk, who will look for a floor trader from whom the stocks can be bought. There is another modern method to do the trading, and this is through online or electronic trading. With this, an online stock broker will still be needed, as he will be the one who will connect to the online network and look for a buyer or seller according to the order of the investor.
When a person buys a certain number of shares of stocks, he instantly becomes a part owner, or shareholder, of the company that owns these stocks. When the business grows and gains profits, the shareholder will get his share of profits in the form of dividends. If the company fails and incurs losses, the shareholder will have to suffer the same as well. This is the risk that every stock investor must learn and understand, and they must be brave enough to take such. The investors will enjoy better rewards and big profits later on if he is able to sell his stocks at higher price than his buying price. Thus, many investors are looking for cheap stocks to buy in the hope of being able to sell them at higher price later on.