Why Didn't I Learn This in School: Stock Up - Stock Market 101

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When a lot of us imagine the stock market, it's usually a bunch of suits yelling numbers in a room, bells ringing, and that bronze bull statue somewhere in there.

It can seem overwhelming, but if you learn how stocks work, you can get in on the action without getting caught in the chaos.

When you buy stock, you're purchasing a piece, or a share, of a company. This means you're investing in the company as a whole -- not buying a new foosball table for the office.

There are two types of stocks to choose from: common and preferred.

Common stocks are the most commonly issued stocks. Long term, they can potentially yield the most money, but this high return comes with a lot of risk, and you can potentially lose it all.

Check out the 7 most valuable companies in the world:

7 most valuable companies in the world
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7 most valuable companies in the world

5. Facebook, $379.8 billion

(REUTERS/Stephen Lam/File Photo)

4. Amazon, $380.2 billion

(REUTERS/Kim Kyung-Hoon/File Photo)

3. Microsoft, $468.7 billion

(REUTERS/Jacky Naegelen/File Photo)

2. Alphabet, $553.9 billion

(REUTERS/Pawel Kopczynski/File Photo)


With preferred stock, you are typically guaranteed a pay day a few times a year. These are called dividends, and while consistent, the payoffs don't tend to be nearly as high.

Next, we can't talk about stocks without mentioning the market. It's the network of buyers and sellers where stocks are traded, or bought and sold.

The rise and fall of a stock depends on many things -- most out of your control. When a market crashes, it's a super sharp decline in stock prices across the board usually because of a few big events -- plus public panic.

To stay on top of the financial climate, stalk the stock market. Study that app on your phone -- pick a company you like and watch it. Talk to people with experience and before you jump, ask yourself the questions: Is this retirement money? Will you need it back in six months?

Once you're ready to take the bull by the horns, find a stockbroker. They're the ones that are licensed to make trades. There are tons of options out there, so talk to your bank or search online for someone in your area.

So, learn when to get in -- or get out -- of the market. If you play things right, the chance of a payoff could be higher than leaving it in your savings.

See Fortune's top 10 companies of 2016:

Fortune's top 10 companies
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Fortune's top 10 companies

Fortune 500 Rank: 10
2015 Revenue: $146.8B

Photo credit: Getty

Ford Motors
Fortune 500 Rank: 9
2015 Revenue: $149.6B

Photo credit: Shutterstock

General Motors
Fortune 500 Rank: 8
2015 Revenue: $152.4B

Photo credit: Shutterstock

CVS Health
Fortune 500 Rank: 7
2015 Revenue: $153.3B

Photo credit: Getty

UnitedHealth Group    
Fortune 500 Rank: 6
2015 Revenue: $157.1B

Photo credit: Getty 

Berkshire Hathaway    
Fortune 500 Rank: 4
2015 Revenue: $210.8B

Photo credit: Getty 

Fortune 500 Rank: 3
2015 Revenue: $233.7B

Photo credit: Getty

Fortune 500 Rank: 1
2015 Revenue: $482.1B

Photo credit: Shutterstock


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