Any person who wishes to increase their capital will inevitably face the concept of the financial market. Securities are the most popular way of money investing, since they provide multiple profits and appear as a highly tradable product which can be quickly bought and sold, which is impossible with fixed assets, for example.
The key word here is the market. Once it is the market, there must be are sellers that offer a product and customers who buy this product. At the stock market, this product is securities. The stock market is another name for the securities market.
Securities are shares, bonds, warrants, notes, options, futures, shares (stocks).
The stock market is a mechanism for transfer of funds from one economic sector to another. It may be represented by the following example: there is a company that produces a specific product, and it has no money for continued manufacture. To get the money the company put its securities to the market. Another company, with possesses the necessary amount of money, buys these securities. This results distribution of capital between the enterprises and industries.
Why traders follow financial news?
Economic and financial news have a direct impact on the stock market, so traders should monitor them constantly. As they say, who owns the information, he owns the world. Different information affect the market in different ways. The share price may go up sharply because of good quarterly income reports, and may significantly drop because of the hurricane that destroyed the company’s production assets. That is why you should follow stock market news, if you do not want to wake up one “fine” morning and see that your profitable position became tragically losing after some important information appeared at the market.
Financial news are important because they: 1. Inform the market. In other words, good news boost increased demand for the share, and the bad news increase offer. It is believed that all the significant short-term fluctuations at the market happen purely because of the news. 2. Create volatility. We will not be able to make a profit if the price is stable. The news at the market, different from the expectations of stock gamblers, create stirring and therefore volatility. 3. Limit the risk. Most of the stock news are scheduled so you know when fresh information will come out, what it will be about, and what its impact on the market will be. Thus, one can prepare for it and, if necessary, limit their risks.
Not all people have enough amount of money for equity investments. However, it should not prevent anyone trading at stock markets. You still can buy and sell stocks and turn an honest penny. Consider penny stocks.
What are penny stocks?
Penny stocks got their name because of relatively low price, which is typically less than $ 5.00. The low price makes penny stocks so attractive to individual investors who usually do not have sufficient funds to build a portfolio of the most expensive shares issued by large companies. Some penny stocks grow in price significantly, bringing their owners incredible profits, but there are cases when the companies issuing penny stocks turn out to be low-profit or even go bankrupt.
Some of the most successful companies started as penny stocks companies. The share price of such companies as Mylan Labs (MYL), Fortescue Metals Group (FMG), originally was well below five dollars, and now it is relatively high (though not a blue chip) and stable. There are companies that started small but it hit big and noted a remarkable increase in the stock price.
Rules to avoid risks at the penny stock markets
Penny stock companies are also known as small-cap companies. Small-cap stands for small-capitalization. These are companies with dollar capitalization less than $50 million dollars. This is the reason why their shares are traded for less than five dollars. But how can one choose these penny stock companies for investment? What are the risks? Since you are playing at the stock market there is always a certain level of risk involved. However, you can minimize the risk, following these simple rules:
1. Make inquiries. When choosing a company for investment, it is important to know if it can offer good prospects for the future. Check its economic background paying attention at each economic event; examine its vision and plans for the future development. This way you can reduce the risk of being a victim of a fraud.
2. Start small. It is better to start with small investment. Remember that you still get some experience from this type of shares. In this case cautiousness is not cowardice, but necessary preventive measure.
3. Follow the trends. Try to follow current market news to understand the common trends. Currently, the shares of IT and environmentally responsible enterprises are nice choice to invest to the future. You can focus on these sectors and keep yourself up to date with the news of these industries.
When you help these small companies, it is cannot be regarded as speculation. There is certain social responsibility that appears if you think that these small companies are really good in their sphere and have promising future. You may find that their products may be solutions to some persistent world issues. Though the profit may be small, do not forget that investing does not always means profit, but always means a game. Benefit is benefit no matter how we look at it. Do not lose courage, you may lose a few dollars, but, at the end of the day, you played the game. Who knows, you may make a fortune supporting losers.