| So how should you go about learning how to buy | | | | of the stock. The second figure you will wish to |
| stocks in the stock exchange? The first thing you | | | | know is the ROIC, or return on invested capital. You |
| need to do is to open up an account at a brokerage. | | | | are basically looking to find out if the company is |
| A brokerage is a firm who acts as an intermediary | | | | generating cash and how efficiently the cash is being |
| between you and the stock market. You tell them | | | | used. If a company makes one million dollars in cash |
| what stocks you want and how much you're willing | | | | and spends most of it for upkeep, that isn't very |
| to pay for each stock, then you pay them a fee and | | | | efficient, if however that same company reinvests a |
| they carry out the transactions for you. | | | | portion of that money, which formulates to a better |
| So now that you have a brokerage account, you | | | | ROIC. These two figures alone won't spell out the |
| need to fund it. You can do this through so many | | | | answer for you in regards to buying stock in the |
| ways it is crazy (they do want your money). | | | | stock market, but they'll get you started. |
| Anyways, the three most popular payment methods | | | | I would like to introduce you to a final concept of |
| that you can pay by are check, credit card, or wire | | | | how to buy stock on the stock market. This concept |
| transfer. Once you have funded your account, it is | | | | hinges more on you, your confidence and |
| time to have some fun. | | | | competency as an investor. The concept is that of a |
| With your newly established account you can now | | | | safety net. The safety net concept fluctuates widely |
| purchase stocks, securities, mutual funds, or other | | | | among investors. Some prefer a wide (safer) net, |
| brokerage offerings. For the purpose of this article, | | | | others prefer more chance. |
| we'll examine the stock exchange purchase. The | | | | The choice is ultimately situational and very personal. |
| most important part of buying stock on the stock | | | | I like a safety net of around 10%-11%. What is a |
| market is thoroughly researching it. What you're | | | | safety net though? To explain this, I will use the |
| basically trying to find is how much the company is | | | | imaginary company Foadco, their value is 5% under |
| worth in relation to how much these small shares of | | | | priced on the street. Foadco's "safety net" is about |
| it are selling for. | | | | 5%, another example is Microsoft in the early 1990s, |
| In your research, you will want to find a few principle | | | | their stock soared way higher than the company's |
| figures, namely the stock's intrinsic value, which is | | | | worth, and this represented a very negative safety |
| found by comparing the calculating the future income | | | | net (meaning you will lose a lot of money by buying |
| of the stock and comparing it to the present value | | | | this stock. |