Investing 101: The Basics pt I

     OK so being that its a recession and I have several friends that ask me all the time about how to invest or what to invest in, I figured why not go ahead and create what I'll be referring to as an Investing 101 series just to give out the tips and secrets that I've used that has allowed me to come up and see a little paper and on the inverse, even throw out some of the lessons that I've learned over time that have gotten me burnt a time or two.  Disclaimer: At no time will this be/or will ever be any attempt to ever try to convince or persuade anyone to start investing (or at least buying stock anyway) because personally I could care less, this will just be an civil attempt to swagger splash (and allow myself to be swagger jacked) people with a perspective of the opportunities involved in trading. Roger? Alright, so first off lets start out with the basics... oh and anything that gets marked w/ a "**" means if the terminology hasn't been defined already then it will be on the next installation or you can just do your homework on it!

     What is a stock and where do you go to buy them? Well first, a stock is a type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings, or basically its owning a stake in the business. The investment rationale is in exchange for companies being able to allow people to buy/pay into a company or corporation to seek an income opportunity, any companies that participate in the stock market officially becomes a public traded company which now means that it is owned and governed by it shareholders, meaning me, you, or anyone who holds a current position in the stock. Anytime you hear that a company remains privately owned...it means that shares of there stocks cannot be bought or sold on the stock market because there isn't any and conceptually it just means it is funded and managed by the original owners or people who have been delegated to run it.


     Now, there are two main types of stock: common and preferred. Common stock usually entitles the owner to vote at shareholders' meetings and to receive dividends. Preferred stock generally does not have voting rights, but has a higher claim on assets and earnings than the common shares. For example, owners of preferred stock receive dividends before common shareholders and have priority in the event that a company goes bankrupt and is liquidated.So for the sake of this conversation we'll be using common stock.

     As far as purchasing stock, honestly you can pretty much go anywhere to open an online trading account: ETrade, AmeriTrade, StockTrade or if you already have a relationship with a brokerage firm like a Merrill Lynch, Charles Schwab, Fidelity, Vanguard, etc. you can also go through them guys as well. (Also for the sake of this blog let assume you'll be doing all of your own investing, meaning no Stockbroker). Account commissions and fees may vary so be selective however the fundamental notion here is whenever you purchase a stock there will typically be a fee and once you go to sell the stock you'll have to pay a commission. Again, be selective on this because typically this will vary based on which company you have a trading amount with so just make sure that you understand the purchasing and selling fees before buying anything.

Some other fundamentals you'll also need to know- The stock market opens and closes everyday from 9 or 10am - 5pm so any order (buy/sell) that you attempt to make after those hrs will not be executed until the market reopens on the next day...and its M-F, no holidays.

     Which leads me to my next omission, a position. A position is quite simply the amount of shares that you own of a specific stock..and quite frankly also its current dollar value. So if you ever hear someone say "I have a $500,000 position in Bank of America," that just simply means they have $500,000 worth of stock (or assets) purchased in Bank of America. And a couple other variations that you may also hear in relation to a position, is being "long" or "short" in a position and all that honestly means is if you are short in a position - then you do not intend on holding the stock for a extensive amount of time (which typically means you are awaiting for a specific catalyst** personal/or market) and if you are long - then you are planning on holding on to the stock for a while to try and make money over the long term.

With that being said, hopefully now you can begin to see that there is certainly a particular amount of strategy and decision making involved. Therefore instead of looking it as gamble, you'll have to be able to think of it more as just a series of "calculated risks" ....and those who can calculate the risks the best, given the information available, wins!

The fundamental key - buy low or at a good price and sell high! 

The Basics pt II (Coming Soon)