A stock can be simply defined as a share in the ownership of a company. A stock represents an investor's claim on the company's assets and earnings. More the number of stocks an investor holds, more will be the ownership stake in that company. Hence, it is important to understand the nuances of stock market. Knowing the basics of stock market is even more important for newbies so as to avoid risks and losses.
Listed below are three most important aspects that investors should always remember under any situation while trading in a stock market.
One should never believe in rumors or tips about a certain stock or a particular company. Almost 50 percent of companies have promoters and brokers assigned with the responsibility of promoting stocks. They tend to attract shareholders with this strategy and eventually sell off their stocks at a higher price. These stocks are bound to crash in the future resulting in heavy losses. These promoters will have their money and will then try to sell some other stock. They end up making a profit using this method every time and it is the individual investor who ends up suffering a loss.
It is very important to do a thorough research about a particular company before putting investment in its stocks. You must always use your brain rather than relying on the advice from others. You should always ignore newsletters, bulletins and press releases while trying to dig out facts about companies.
It is better to start small while trading stocks in the stock market. You should only invest money that you can honestly afford to lose.