Stock Market Basics: A Beginner’s Guide to Investing

1. What is the Stock Market?

The stock market is where investors buy and sell shares of publicly traded companies. Major exchanges include:

NYSE (New York Stock Exchange) – The world’s largest stock exchange.
NASDAQ – Known for tech stocks like Apple and Amazon.
Other global markets (e.g., London Stock Exchange, Tokyo Stock Exchange).

How it works:

Companies issue stocks (shares) to raise capital.
Investors buy shares, hoping their value increases over time.
Prices fluctuate based on supply, demand, and company performance.

2. Why Invest in Stocks?

✅ Higher returns than savings accounts or bonds (historically ~7-10% annually).
✅ Beat inflation (money grows faster than price increases).
✅ Ownership in companies (dividends, voting rights).
✅ Liquidity (stocks can be sold quickly).

Risks:
❌ Market volatility (prices go up and down).
❌ Potential losses (companies can fail).

3. Key Stock Market Terms

Term	Definition
Stock (Share)	A unit of ownership in a company.
Dividend	A portion of profits paid to shareholders.
Bull Market	Rising stock prices (optimism).
Bear Market	Falling stock prices (pessimism).
IPO	Initial Public Offering (when a company goes public).
ETF	Exchange-Traded Fund (bundle of stocks).
P/E Ratio	Price-to-Earnings ratio (valuation metric).

4. How to Start Investing

Step 1: Set Clear Goals

Short-term (1-5 years): Safer investments (bonds, ETFs).
Long-term (10+ years): Growth stocks, index funds.

Step 2: Choose an Investment Account

Brokerage Account (e.g., Fidelity, Charles Schwab, Robinhood).
Retirement Accounts (401(k), IRA – tax advantages).

Step 3: Pick Your Investing Strategy

Strategy	Best For	Risk Level
Index Funds (S&P 500, ETFs)	Passive investors	Low
Dividend Investing	Steady income	Medium
Growth Stocks	High returns	High
Value Investing (Warren Buffett style)	Undervalued stocks	Medium-High

Step 4: Research Stocks

Fundamental Analysis: Financial health (revenue, debt, P/E ratio).
Technical Analysis: Price trends, charts.
News & Trends: Industry shifts, earnings reports.

Step 5: Start Small & Diversify

Don’t put all money in one stock.
Use dollar-cost averaging (invest fixed amounts regularly).

5. Common Beginner Mistakes to Avoid

❌ Trying to time the market (buy low, sell high is hard).
❌ Panic selling during dips (hold long-term).
❌ Over-trading (high fees, taxes).
❌ Following hype (meme stocks, FOMO).

6. Best Resources for Learning

📚 Books: The Intelligent Investor (Benjamin Graham), A Random Walk Down Wall Street.
📺 YouTube Channels: The Plain Bagel, Andrei Jikh.
📈 Tools: Yahoo Finance, TradingView, Morningstar.

Key Takeaways

✔ Start early – Compound growth works best over time.
✔ Diversify – Spread risk across sectors.
✔ Stay disciplined – Avoid emotional decisions.
✔ Keep learning – Markets evolve.