Have you ever analyzed the emotions that you go through when it comes to spending or investing your money?  It is funny how happy, stressed, sad, and free that it can make one feel.  People want to know all the time how to pick the winners when it comes to stock buying and investing.  Most people will form some sort of educated guess that may amount to some type of return and may not.  I remember the first time I followed stocks.  I followed America Online in 1998 and thought for sure that their shares would increase.  I was blown away by the fact that they did not.  I couldn’t understand it.  Of course today America Online (AOL) is seldom used compared to Google and Yahoo.  There are a couple of key subjects to understand if you want to master the stock buying and investing world and we will give you an introduction on those key subjects.

Understanding What A Stock Is

A stock is defined by www.wikipedia.com as “The capital stock (or just stock) of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors. Stock is distinct from the property and the assets of a business which may fluctuate in quantity and value.”  So in lament term when you buy some stock you are buying a share of a business.  The business is usually a bigger business (as most are on the stock market).  When you buy it you are speculating that it will go up in price and make you money on your return.

1998 Stock Tracking

So in 1998 I was certain that AOL would rise in prices with the new Dot-com boom and Internets popularity.  But, when it didn’t I was baffled.  Many people invest like this.  It didn’t matter that I had now idea how AOL worked or was ran or what it was predicted to do in the next quarter or year.  I just thought it would go up.  What I didn’t understand at the time was the basics of a business, how it works and how money flows.  Neither, did I understand really how the economy worked and how businesses work in an economy.  These are the principles that are a must to succeed in stock buying and investing.  You must know how a business works…truly how business works, how to see the signs of the economy, where it is, where it is going, and how money flows.

For many people when they hear that this is what they need to know to become successful at stock buying and investing they run.  It can sound like a big bad world if you do not know what it going on….and it can be.  However, it is just like riding a bike at first you need training wheels, wobble around a little bit next, and then you are off on your own.  Later many are riding wheelies and doing tricks.  For an expert BMX rider if you ask them if riding a bike were easy they would probably reply ‘Yes’.  For an expert stock investor they might be likely to say the same.  It may take some practice but if you are committed you will succeed.