The Keys to Learning the Stock Market


by Sarah Freeland - Date: 2006-12-19 - Word Count: 365 Share This!

If you have decided that this is the year that you will be learning the stock market then a good place to start that education is by learning about three different terms: the stock exchange, the economy, and mutual funds. First the stock exchange is the same thing as the stock market. It is basically the place where stocks can be bought and sold.

The economy is a term that refers to the economical system that is in place in a specific market. When talking about the stock exchange the economy that is referred to is generally going to be the United States' national economy. However, in some cases, such as in the case of international stocks, a world wide economy or foreign economy may actually be the economy that it is being discussed. The U.S. economy is influenced by a number of factors including: spending trends, imports/export ratios, federal interest rates, the availability of raw materials, labor costs, and politics. The state of the economy then impacts the health and performance of the stock market by: determining how much money is available for investments, by establishing spending and trading trends, and by impacting companies' abilities to operate and to make a profit.

The final term that will be discussed in this brief article is mutual funds. Mutual funds are basically a managed investment portfolio that pools together investors' money to buy bonds and stocks that fit within the range of investments that the fund is interested in. In many cases mutual funds deal with BBB or better rated stocks and bonds, and they usually have an investment specialty. For example a mutual fund may only invest in companies that have a market capitalization of $5 billion or more. The advantage of buying a mutual fund is that you don't have to buy a lot of different stocks and bonds by yourself, instead you can get all of the earning potentials of a variety stocks by purchasing shares in a single mutual fund. The drawback to buying a mutual fund is that they have fees and expenses that are used for covering the management costs of the fund, and these costs can eat away at your profits.


Related Tags: money, finance, stock, market, invest, stocks, broker, profits, exchange, economy, bonds, rates, mutual fund

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