Most stocks are traded on exchanges, which are places where buyers and sellers meet and decide on a price. This is why it’s called a market. The supper market and stock market are similar in that both rely on supply and demand to decide the cost. Some exchanges are physical locations where transactions are carried out on a trading floor. You’ve probably seen pictures of a trading floor, in which traders are wildly throwing their arms up, waving, yelling, and signaling to each other. The other type of exchange is virtual, composed of a network of computers where trades are made electronically.
The purpose of a stock market is to facilitate the exchange of securities between buyers and sellers, reducing the risks of investing.
The New York Stock Exchange
The most prestigious exchange in the world is the New York Stock Exchange (NYSE). The “Big Board” was founded over 200 years ago in 1792 with the signing of the Buttonwood Agreement by 24 New York City stockbrokers and merchants. Currently the NYSE, with stocks like General Electric, McDonald’s, Citigroup, Coca-Cola, Gillette and Wal-mart, is the market of choice for the largest companies in America.
- Diversity is key. If you wish to invest in individual stocks, make sure you select a broad range of sectors.
- No more than 15% of the total value of your stock portfolio should be in any one sector.
- No more than 10% of the total value of your stock portfolio should be in any one stock.
- In addition to sector diversification, keep in mind that capitalization size can affect your standard deviation
- Always keep an eye on taxes when selling securities. Know what a tax swap is.
Deciding which stocks to invest in can be difficult, especially if you have a low tolerance for risk. That’s why it’s important to define your financial goals and learn how much risk can be tolerated before investing. Research stocks that fit within your strategy and invest in stocks that have the potential to help you meet your specific goals, whether you want investment growth, income, or a combination of the two.
Your Investment Consultant can provide you with a wide range of stock investing services, including:
- Asset allocation strategy development
- Individual stock selection and research
- Help in deciding when to buy and sell your stocks
- If and when to put a stop loss on trades
- Selling covered calls to generate income
- Buying puts to protect gains
- Using coaching techniques when emotions get involved