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A Business Blueprint to Stocks

Dec 14, 2007
Because of the large size of the stock market, beginner investors seem to feel overwhelmed as to where to even begin investing their money. To most people, the stock market presents a tangled web of options but does not provide the road map of clarity to direct their way along way in their investment adventure. The key to investing in the stock market is to become as educated as possible so that you know exactly what is taking place at all times. This helps people to make logical and sound decisions about their money, thus, reducing the stress involved with investing.

The average person, when beginning to entertain the idea of investing in the stock market, falls into one of two categories. Category one is the gambler who feels that investing is definitely a form of gambling and no matter what they do, they are certain that they will lose money rather than make money. It seems that this opinion of investing in stocks is either formed from friends and family that have lost in the stock market or personal experience.

If a person has personally lost in the stock market, it is quite evident that they were not educated enough at the time of their investment into the stock market. Therefore, they must become educated as to what exactly the stock market is as well as how it works in order to become successful investor.

Category two, on the other hand, represents the "go-getter" investor, which is an individual who knows that they should invest into the stock market for the security of their financial future, but they have absolutely no idea where to begin. The "go-getters" tend to leave their financial decisions up to professionals; therefore, they are unable to explain why they own a certain stock.

A typical "go-getter" operates in blind faith, as one stock goes up in value, they more than likely will purchase it. The "go-getter" is in worse shape than the gambler in that they will invest like everyone else and then wonder why they receive unsatisfactory or devastating results. This just proves that the average person should become thoroughly educated about the stock market as well as stocks before investment takes place.

Essential to every economy is business...businesses that started out as small operations who have grown to become money making giants, raising capital by selling stock in themselves to people who are wanting to invest to make their futures financially secure. As small businesses begin to grow, one of the greatest obstacles is generating enough money in order to expand into a larger operation.

Businesses either borrow the money in the form of a loan from a bank or venture capitalist, a person that will invest money into a business in which they feel they will receive a high rate of return, or a gain from their investment into a business, in order to generate the cash to expand. The most common option for a business to obtain money for the reason of expansion is to take out a loan; however, there is no guarantee that a bank will lend money to any given business.

In this case, business owners turn to the stock market for help in the form of issuing stocks. Business owners relinquish a tiny fraction of control over their business and in reciprocation, the stock market provides that business money that does not have to be paid back, in order to ensure expansion. As an added bonus, the business is allowed to "go public," a phrase that means a company is selling stocks for itself for the first time, so that business owners no longer are forced to borrow money from banks because they can simply use their own stock for receiving monies to use toward expansion. Thus, as the business grows and sells their stocks to people, the better chance an investor has on gaining a return on their investment as opposed to a loss.

As an investor, it is to your advantage to efficiently research each and every business in which you plan to purchase stocks. The more facts you know about any certain business, the easier it is to make a logical decision as to whether you should purchase stocks or choose a different business in which to work with.
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