Stock market investing for beginners the ultimate guide on how to invest in stock (investment book)

Stock Market Investing for Beginners

The Ultimate Guide on How to Invest in Stock


Table Of Contents
Introduction
Chapter 1 Stock as a Wealth Tool
Chapter 2 Basics of Stocks
Chapter 3 Why Stocks Exist
Chapter 4 Types of Stocks
Chapter 5 Other Types of Exchange
Conclusion
Preview Of ‘Bitcoin for Beginners Guide’
Check Out My Other Books


Introduction
I want to thank you and congratulate you for downloading the book, “Stock Market Investing for
Beginners” .
This book contains proven steps and strategies on how to make your way through the intricate world
of the stock market as a beginner.
This book will open your eyes to the things you need to know before venturing into the stock market
and start trading.
This book will delve into the terms and strategies that every beginner needs to know.
You will get to know how the stocks have come to what it is now, and why they still exist up to this
very day. You will also learn the different types of stocks used in the market and how they are being
utilized in the industry.
Aside from that, you will also be able to point out the other types of exchanges.
Let’s begin.

Chapter 1: Stock as a Wealth Tool
Have you ever wanted to be your own boss? Imagine if you could build a reliable source of income
from the comfort of your own home, and spend your time watching your money grow! It might sound
like an impossible goal, but it’s a reality for many people who successfully trade on the stock market.
Stocks are one of the greatest tools ever created for building wealth. If you plan on investing and
growing your money, knowing how to successfully trade on the stock market is mandatory. Stocks
make up the majority of almost every investment portfolio, and can be a great way to store and grow
your capital.
Years ago, only the rich were able to trade on the stock market, and they used it to amass fortunes.
Nowadays, thanks to advances in technology and education, the stock market is available to almost
everyone. There’s never been a better time to start trading.
Regardless of how popular stocks have become, most people still don’t understand how stocks work.
On top of the lack of information, there’s also a lot of bad information and advice, given by people
who don’t know what they’re talking about. A lot of this information is based on the “get rich quick”
mentality, where others will urge you to invest everything into a certain company, or make constant
risky decisions. The stock market is not a casino, and you shouldn’t be risking any large amounts of
money. If you play the stock market carefully and consciously, it’s very possible to make a constant
return that will grow your wealth to new heights. The best way to protect your money in the stock
market is to understand where you are putting your money.
That’s why I’ve created this guide, to give you the knowledge you need to make smart investment
decisions. I’ll begin by explaining the basics of stocks and the different types of stocks, and then will
cover how they’re traded, and what causes prices to fluctuate.


Chapter 2: Basics of Stocks
What is a Stock?
In layman terms, a stock is representative of a single share in the ownership of a company. A stock is
a claim on a company’s earnings and assets. The more stock you own, the more of the company you

own. For example if you buy 51% of a company’s stock, than you own the majority of the company
itself, and are entitled to most of its profits and assets.

Stock Owner Rights
By owning stock, you become one of the many shareholders who direct the company. This means that
you are entitled to any voting rights associated with the stock, and your influence in the company
increases with every stock you buy. You won’t be able to influence the day to day actions of a
company; however you can influence its direction by voting to elect people to the board of directors
at annual meetings.
The management of a company is supposed to increase profit for shareholders. That is their main
responsibility, and those who don’t are often voted out. However, for most major companies, there
are such a large amount of shares that the average person won’t have much influence. For any fortune
500 company, the only entities that could make an impact are billionaire investors and large funds.
However if the majority of voters are of the same mind, they can make a massive impact even if it
goes against the wishes of the other larger shareholders, as long as their combined % of ownership is
larger than the other voters.
Prior to the popularity of online brokers, a stock would be represented by a stock certificate. This
was a piece of paper that provided proof that you owned the stock. Nowadays this type of information
is stored electronically by your online broker. This is good, because it makes the shares easier to
trade. With a click of a mouse or a simple phone call, now you can trade instantly to take advantage
of any potential opportunities.
However, most shareholders don’t concern themselves with trying to manage or influence the
company. The great thing about stocks is that you can profit off them passively, with very little work.
The main benefit to a stock is the share of the profit that you’re entitled to. Profits are paid out in
dividends, which is the amount of profit distributed per stock. The more stock, the more profits. As
for your ownership of assets, this only comes into play if the company becomes bankrupt. In the case
of a bankruptcy, all the company’s assets will be liquidated. First the creditors (people who the
company owes money to) will be paid, and what’s left will be distributed among the shareholders.
At this point you’re probably wondering “If a stock means I own part of a company, does that mean
I’m liable to pay their debts as well?” The answer is no, thanks to an excellent feature of stocks

called limited liability. As opposed to a partnership, where if the partnership goes bankrupt creditors
can go after the partner’s assets personally, stockholders are completely shielded from any liability.
When you buy a stock, the maximum amount of money you can lose is your initial investment. If you


buy 1 stock at $90, you will never lose more than $90. This creates an excellent situation where you
are entitled to all the profits of a business, and none of the debts. Although any debt the company has
will lower the prices of the stock and cost you money indirectly, you can always sell the stock and
move on.


Chapter 3: Why Stocks Exist

Why do Stocks Exist?
At some point, everyone asks the questions, “Why do stocks even exist?” If a company is profitable,
why would they want to share their profits with hundreds or thousands of people? The answer is to
raise money. At some point, every company wants to raise money to finance their future endeavours.
They can do this either by borrowing money or selling parts of the company in the form of stocks.
Borrowing money, or issuing bonds with a guarantee to pay back, is known as debt financing. Selling
stock is known as equity financing.
Oftentimes, selling stock is the best idea financially since it doesn’t require the company to be
burdened by debt repayments, or to make interest payments. The first sale of a stock is called the
initial public offering, or IPO. All that shareholders get in exchange for their money is the hope that
the stock will go up, and the company will be profitable enough to pay out dividends.

There is a big difference between a company financing through debt, and financing through the selling
of shares. If you purchase debt in the form of a bond, you’re guaranteed the return of your initial
payment, as well as interest payments. This isn’t the case with a stock. By purchasing stock and
becoming a shareholder, you will be taking on the risk that the company will fail, and you might
potentially lose your initial investment. Also if the company becomes bankrupt, you will be paid only

after the creditors have been paid. So if someone has bought a bond from the company, they will be
paid first before any shareholders are paid. If a company is successful there’s opportunity for long
term profits and growth, however if it fails then you stand to lose whatever capital you invested into
that company.

How Much are You Willing to Risk?
It’s important to remember that when it comes to individual stocks, there are no guarantees of
profitability. While you might make predictable income on a large spread of stocks if you invest
intelligently, you should never bet a large amount of your capital on a single stock. Even if you have
good reasons to believe that a certain company will be increasing in value soon, there’s no such thing
as a “sure thing” and multiple foolish investors have lost fortunes betting on a single company. It’s
important to diversify your stocks. You should also keep in mind that while most companies pay out
dividends, some of them won’t, or will only pay them irregularly. In that situation, it’s important to
only invest if you have reason to believe the stock will go up. If a company pays dividends regularly,
than even if you think the stock will stay at the same price, it can still be a good idea to buy for the
dividends and sell later at the same price.
Although risk should in general be minimized, that’s not to say that all risk is bad. Every trade you
make involves some level of risk, and in general the higher the degree of risk the larger the profit


there is to be made. Stocks have historically produced a return of 10-13% per year, ever year. This
beats the rate of inflation significantly, and is a great indicator of the profitability of stocks.
Now, let’s talk about the two types of stock. There’s common stock, and preferred stock. Both are
important, however they both have significant differences.


Chapter 4: Types of Stocks

Common Stock

Common stock is, as the name suggests, the most common type of stock. When people refer to stock,
this is what they mean most of the time. This type of stock represents ownership of a specific
percentage of a company, and an entitlement to your share of the company’s profit. Owners of this
type of stock get one vote per share when it comes time to elect members of the board, who make
major decisions concerning the company.
Stocks provide a greater return on your initial investment than almost any other type of investment on
average. However stocks are also one of the more risky investment instruments, since you run the
chance of losing your initial capital if you don’t invest wisely.

Preferred Stock
Preferred stock is similar to common stock, with certain key differences. The two main differences
are that with preferred stock, you don’t have the same voting rights in a company, if at all. Secondly,
the dividends paid to you are a fixed amount. With common stock your dividends are a percentage of
profit per share, and so the amount of dividend paid varies depending on how well the company does
financially. With preferred stock, you receive the same amount of money every quarter regardless of
how the company does. This can be a good thing or a bad thing depending on whether or not the
company in question starts underperforming or not. People with preferred stock are also paid before
people with common stock in the event of bankruptcy or liquidation; however they are still paid after
the creditors. Preferred stock is considered a mixture of debt and equity, and it’s helpful to view them
as somewhere in between bonds and normal shares.
Different Strands of Stock
Although common and preferred stock are the two main types, there are also ways for companies to
customize specific types of stock in virtually any way they want. One of the most common reasons for
doing this is so that voting rights remain within a certain group, and to accomplish this companies
issue different classes of shares with different voting rights. As an example, a company might issue a
certain type of share that gives 10 votes per share to a select few, and another that only gives 1 vote
per share to the majority.
When a company issues multiple types of stock, they are designated as Class A, Class B, and so on.
The different types are shown by placing the letter behind the normal ticket symbol, for example
instead of BAC it would be shown as BAC.A, and BAC.B.

The majority of stocks are bought and sold on exchanges, which is a place where sellers and buyers
meet and decide on a price. Exchanges can be physical locations where deals are made on the trading
floor, for example the New York Stock Exchange. This is the one you see in movies often, with
traders yelling loudly and running to make deals. Exchanges can also be virtual, made up of multiple
computer networks where trades are finalized electronically from the comfort of your own home.
Exchanges are necessary to facilitate the exchange of shares between buyers and sellers. Imagine if
you had to search around to find someone with the type of stock you want!
Prior to continuing, it’s important to clarify the difference between a primary market and a secondary
market. The primary market is where the securities are initially traded, in the form of an IPO (as
mentioned earlier), whereas in the secondary market investors trade securities that were already sold
without any involvement of the original company.

The New York Stock Exchange
The largest and most influential primary exchange in the entire world is The New York Stock
Exchange. This stock exchange is over 200 years old, created only a few decades after the founding
of The United States. The largest companies in the US list themselves on the NYSE.
The NYSE was the first exchange of its kind, where the majority of the trades were conducted face to
face on a trading floor. Orders are received from brokerage firms that are members of the exchange,
and those orders make their way down to the trading floor where the desired stock is traded. At each
of these locations there’s a person called the specialist, whose responsibility it is to match traders
with sellers and vice versa. An “auction method” is used to determine prices, where the price at any
given time is highest amount a buyer will pay for the stock, and the lowest amount price that someone
will sell it at. After the trade is completed, the information is sent to the brokerage firm, who passes
on the news to the investor who requested the trade initially.

The NASDAQ

The second type of exchange is the NASDAQ. You’ve probably heard this referred to on the news,

and it is a very important exchange. This exchange is completely virtual, with no central location or
floor for traders to physically trade on. All trading is done through computers and the networks of
dealers. Years ago, the largest companies were traded through the NYSE while less valuable
companies were sold through the NASDAQ. However since the tech boom in the late 90’s, the
NASDAQ now is the place to go to buy dozens of massive companies, such as Intel, Dell, Microsoft
and others. This increase in importance has made the NASDAQ a competing force, and a place where
all the biggest investors come to trade.


Chapter 5: Other Types of Exchange
Other Exchanges

Coming in third in terms of size is the AMEX, or the American Stock Exchange. While the AMEX
used to be considered as an alternative to the NYSE, that has changed since the popularity of the
NASDAQ. In fact, the owners of NASDAQ, the National Association of Securities Dealers, have
bought Amex.
There are multiple stock exchanges in almost every country that exists in the world. While US markets
are the largest, they are just one part of the world market that buys and sells stocks. There are other
major stock exchanges such as the London Stock Exchange, and the Hong Kong Stock Exchange. The
world turns to these major exchanges to see future trading trends, and make analysis of where the
market is heading. Lastly, there is the OTCBB or over the counter bulletin board. This is the home to
penny stocks other risky stocks, since there is almost no regulation present. Avoid trading in penny
stocks at all costs, as they are rife with scams.
Stock prices are constantly fluctuating based on market demands. Stocks are influenced only by
supply and demand, which is a very basic concept. Don’t be fooled however, because supply and
demand are influenced by 100’s of different factors. Sometimes a simple rumour is enough to crash
the price of a stock! The more people who want to buy a stock, the higher the price goes. The more
people want to sell, the faster the price will. It is often said that trading stocks takes a day to learn,
but years to master. This is true, and after you learn the basics of trading it will take a lot of practice
before you make a living off buying and selling stocks full time.

The important thing to understand is what makes investors like certain stocks, and dislike other
stocks. Basically you need to understand what type of news is going to add value to a company, and
what type of news is going to create unease and drive the prices down. This varies widely based on
what type of company you’re looking to invest in. The indicators for a tech company are going to be
different than a lumber company, since they both have their own intricacies. The best advice I can
give is to research each company individually, and consult with a financial advisor if possible.
It’s also important not to confuse a company’s stock price with the value of the company. If one
company sells stock for $100 a share and another company sells it for $10 a share, this doesn’t mean
the first company is worth more if they issued less than 10x the stock of the second company. The
price of a share multiplied by the amount of shares is called the market capitalization. For example:

Company X issues 5000 shares at $100 each. Total market capitalization is $500,000.

Company Y issues 500000 shares at $10 each. Total market capitalization is $5,000,000.


A company’s stock price doesn’t just include the current value of a company; it also includes
expectations of future growth. For example if most investors feel a company’s stock will double in
price over the next 10 years, the stock price will almost double even though the company hasn’t
actually created any more value yet. So if someone invests in that company at its inflated price and the
company does as well as expected, that person won’t make any money since the stock price had
already taken the growth into account.
By far, the most important indicator of a company’s value is its earnings. Earnings are just another
word for profit, and of course increasing profit is the primary goal for any publically listed company.
If a company fails to return a profit, it won’t stay in business. Earning reports are released quarterly,
four times a year. Each earning report will have an impact on the stock price, so it’s very important to
be up to date with information if you’re heavily invested in a certain company. If a company does
better than expected its price will rise, and if it does worse than expected its price will drop. If its
earnings are in line with past predictions, it will stay at its current level.
Obviously, it’s not just profits that can change the price of a stock. It would be very simple to invest if

that was the case! A great example of this is the dotcom bubble, in which hundreds of internet based
companies had market capitalizations in the billions, without making a single dollar. Their market
capitalization was based on the expectation of future earnings, and in most cases these future earnings
didn’t happen. This lead to many people losing fortunes overnight.
Most investors have a system they use to determine if a stock is going to rise in price, which only has
current and past profits as a single component. Examples range from simple systems such as the
price/earnings ratio, to incredibly complicated systems such as the moving average convergence
divergence system. While systems can be a helpful tool, they should never be relied on completely. If
you’re just starting out trading, you should be basing your trades on a sound knowledge of the
company, not on any sort of trading system.
When you’re starting out trading, here are the most important factors to remember. If you can grasp the
following concepts, you will be miles ahead of your competition and starting on firm ground.
The basic concepts to remember before you start trading are the following:

Supply and demand in the market determines the stock price, nothing else.
The price of a share multiplied by the amount of shares issued is the value of a company, commonly
referred to as market capitalization. Just comparing the stock price of two different companies is
meaningless and misleading.
Although current and projected future profits are the main movers of stock price, the price can vary
based on hundreds of different factors. It’s important to consider investor’s expectations, the future of


the companies industry, and any other factor that might influence the price of a stock. Major events
such as wars or natural disasters will almost always influence the price of a stock if it is based in the
country the event is happening.
Try not to get too caught up in theories or systems that try to explain the way stock prices move. There
is no single system that will ever predict the future price of a stock.
Never trade in penny stocks, or other high risk stocks. Many people try to out of greed, but if you do
this you might as well go to the casino and put all your money on black.
Stock is a percentage of ownership. As a shareholder, you have a right to the earnings and assets of a

company, as well as voting rights for common stocks.
Stocks are equity, bonds are debt. Bondholders are guaranteed a return on their investment, and
stockholders are not. Although stocks have the greatest potential for profit, they also have a higher
risk associated with them.
It is possible to lose all your money invested in a stock. While rare, it can happen and so you should
never put all your capital into a single investment unless you’re willing to lose it. On the flip side it is
also possible to make fortunes with the right investment.
Common stock provides dividends based on the profits made by the company, and preferred stock
provides a fixed dividend.

If you understand these basic concepts, you’ll be well on your path to becoming a successful trader.
There’s nothing else to do but start trading!


Conclusion
Thank you again for downloading this book!
I hope this book was able to help you to gain knowledge about the stock market.
The next step is to apply what you’ve learned in the stock market and look into more advanced terms
and strategies.
Finally, if you enjoyed this book, please take the time to share your thoughts and post a review on
Amazon. It’d be greatly appreciated!
Thank you and good luck!


Preview Of ‘Bitcoin Beginner Guide: Everything You Need To
Know About Bitcoin Mining, Trading, and Making Money with
Bitcoin’
Chapter 1: A Short History of Bitcoins

“I think Bitcoin is a massive conceptual and helpful step forward” – Godfrey Bloom. Political Leader

Change is inevitable, and perhaps the only thing that is here to stay. Sometimes, this change comes to
us by design, and in other times, purely by coincidence or by accident. Whichever way, it appears
from the time the foundations of the world were laid, life has been full of changes- changes that
humanity will continue to experience and witness to the end of ages.
It is no wonder that the young generation today is referred to as the digital generation, one which is
living in a global village. Yes, a global village. Sending and receiving money is no longer limited to
time and geographical locations. Money, as well as other communications, can be sent from anyone to
anyone and from anywhere to anywhere at any time.
Imagine being able to transfer money to anyone in the world without the interference of banks or
governments.

Virtual Currency
Virtual currencies are not new to the internet world. This concept has been around almost as long as
the internet itself. It allows users to exchange goods and services without government regulation.
Previous virtual currencies didn’t come without their own set of significant challenges. Some of these
currencies could be replicated without value and there was no way to verify transactions using the
currency. The value of non-commodity virtual currencies depends on the users to agree on their value
– people need to agree on what the virtual currency is worth in order for fair transactions to happen.
Even gamers are familiar with virtual currencies that are usable within games such as World of
Warcraft and Second Life. However, there was little use for these currencies outside of the gaming
world.
Before bitcoins, none of the virtual currencies seemed to live up to their hype and they didn’t last
very long.
Let’s take a look at some of the virtual currencies that had their time in the 90’s:
ECash and DigiCash (R.I.P. 1998)
CyberCash (R.I.P. 2001)


The Father of Bitcoin

“With e-currency based on cryptographic proof, without the need to trust a third party middleman,
money can be secure and transactions effortless.” –Satoshi Nakamoto, Bitcoin developer

In 2008, a person (or group of people) published a paper under the name ‘Satoshi Nakamoto’ on The
Cryptography Mailing List describing Bitcoin currency. From then on, Satoshi Nakamoto has been
known for inventing Bitcoin. Satonshi is known as a computer programmer, although, it is not clear
whether he worked alone, or he worked in the company of other programmers.
A year later, Satoshi managed to roll out the bitcoin currency on the internet, seeing a great
production of bitcoins in 2009. He mined the first set of bitcoins called the ‘Genesis Block.’ The
production of bitcoins is progressive, and follows a particular process called mining, which will be
discussed later in this book.
Nakamoto’s identity remains unknown although, you can imagine the subject has been the subject of
much speculation.

Did you know?
-Bitcoin.org was registered as a domain name in 2008 and the first 50 bitcoins were mined in 2009.
-Nakamoto is believed to have about one million bitcoins. Around December 2013, this was about
the equivalent of US $1.1 billion.
-Bitcoins were valued at only $0.0003 per 1000 bitcoins when they were first traded! The first
transaction of bitcoins occurred in 2010 when a Florida computer programmer purchased 2 pizzas for
10 000 bitcoins.

What are bitcoins?
Why are people all over the world using this virtual currency?
Bitcoins are a digital currency, call it digital money. Bitcoin is decentralized and peer-to-peer virtual
currency. Bitcoin transactions are irreversible and permanent, and are anonymous (for the most part).
Bitcoin is just but a number, whose association is limited to a given bitcoin address in your computer.
The abbreviation of this currency is BTC, hence 1BTC, 21BTC, 49BTC, 1000BTC, 2014BTC, and
so on.

Why has bitcoin survived this long?
While so many other digital currencies have suffered premature deaths, bitcoin still continues to
thrive today. Bitcoin is a virtual currency, but they have survived much longer than their predecessors


because there is no way to double spend the currency. Once a bitcoin is spent, it is gone. Each bitcoin
has a unique serial number making it impossible to duplicate or replicate and transactions are
irreversible.
Bitcoins are mined but, there is a limited supply. In the coming years the production of bitcoins will
come to a halt, it is would only be necessary to mention that this should not deter traders and
investors. It is expected, that with this natural occurrence in the chain of production, and with obvious
user increment, bitcoins will then be divided into much smaller denominations. This would quite
significantly increase the amount of bitcoins in circulations, and hopefully sufficient to meet the needs
of the expected broad clientele, across the world.
In the end, the currency will not only be deemed scarce, but also increase in value quite substantially.
You call it the principle of demand and supply, right? If anything, these are some of the major
characteristics of money. Named after the pseudonym founder Satoshi Nakamoto, it is presumed that
these smaller denominations will be referred to as ‘satoshis’.
As opposed to other currencies in the world, bitcoins allow for buyers and sellers to transact from
any part of the world, at any time of the day, with any interested parties, without having to engage
middle men or financial agencies. Similar to the value of gold or silver, bitcoins have value based on
supply and demand. The supply of bitcoins comes from those who mine them (just like gold) or from
these people who already have a supply.
This system is one of the emerging forms of cryptocurrencies, and which to a large extent is still at
experimental levels. As of the time this book is published, Bitcoin’s future is uncertain. There is
possibility of government regulation that is threatening users and investors. Publicity in early 2014
has been mixed especially after the Bitcoin exchange Mt. Gox stopped their services.

Did you know?

-In 2011, Forbes Magazine published an article about this new virtual currency. Bitcoin’s popularity
(and value) went up after the article came out and people began to invest in Bitcoins.

-Mt. Gox was launched in July 2010 and served as a Bitcoin exchange and in 2013 it was handling
70% of all Bitcoin transactions. In early 2014, this massive Bitcoin exchange closed down.

-In late 2013, a website named Silk Road was shut down by the U.S. Federal Bureau of Investigation.
This website was used for the buying and selling of illegal drugs using Bitcoins.

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Check Out My Other Books
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Simply click on the links below to check them out. Alternatively, you can visit my author page on
Amazon to see other work done by me.

Bitcoin Beginner Guide: Everything You Need To Know About Bitcoin Mining, Trading, and Making
Money with Bitcoin

Coping With An Addict: How to Deal with Substance Abusers

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