How to Stock market investment for beginners

As of February 2011, Microsoft had about 8.4 billion shares outstanding. Bill Gates owns about 591 million shares, making him a 7% owner. He is the largest single owner. I’m sure other important Microsoft executives also own big chunks. The rest is owned by the public—that’s you and me. If you buy 100 shares of Microsoft stock, you are a 100/8,400,000,000th (or 1/84,000,000th) owner of one of the largest companies on Earth. You’re not going to catch up with Gates, at least not with Microsoft stock :) You may not feel like much of an “owner” of the company because you have no practical control over what Microsoft does (you don’t even qualify for a discount on Microsoft Office), but legally that’s exactly what you are, and it has some potentially important legal and financial implications for you. This book is About Common Stock Shares of stock ownership in a company are known as “common” stock, and that’s the subject of this book. There is such a thing as “preferred” stock, but it’s different, and not the subject of this book. Whenever you hear people bragging about selling stock for a profit, or the New York Stock Exchange, or their stockbroker, or the Dow Jones Industrial Average, they’re referring to common stock. Common Stock Ownership Means: You become a part owner in the company, in proportion to how many shares you own. If the company’s Board of Directors declares a payment of dividends, you will receive the same per-share payment as every other common stock owner. You have the right to attend annual stockholder meetings and to vote on proposed changes and on who is on the board of directors. You get one vote per share of stock you own. So you do have a say-so in how Microsoft is run, but at 100 shares it’s a lot smaller than Bill Gates'. If the company goes out of business, you have the right to receive whatever is left over after its legal debts and the lawyers are paid, in proportion to how many shares you own. So, in summary, a share of common stock is a unit of ownership in a corporation. Buyers negotiate with sellers to reach a price they can both accept. Let’s say you tell your broker to buy you a “round lot” (100 shares) of Microsoft. (Any number of shares less than 100 is an “odd lot.”) Because that’s a small amount, your order is grouped with other customers, and they send an order to a representative on the floor of the New York Stock Exchange. Through what looks like confused shouting, that person finds someone who is selling Microsoft. They negotiate on the price. If that seems rather quaint, inefficient and…old-fashioned (not to mention 20th century) you’re right. In 1971 the National Association of Securities Dealers started the NASDAQ computerized exchange, though at that time it was basically a computer bulletin board. Now, NASDAQ is the second-largest stock exchange in the world (behind the New York Stock Exchange), and it’s still all-electronic. Eventually, the New York Stock Exchange will be all electronic as well, but nobody knows when.