How Stocks and the Stock Market Work.

­The stock market appears in the news every day.

You hear about it any time it reaches a new high or a new low, and you also hear about it daily in statements like "The index rose 2 percent today, with advances leading declines by a margin of..."

Obviously, stocks and the stock market are important, but you may find that you know very little about them.

What is a stock?

What is a stock market?

Why do we need a stock market?

Where does the stock come from to begin with, and why do people want to buy and sell it.

Let's say that you want to start a business, and you decide to open a restaurant. You go out and buy a building, buy all the kitchen equipment, tables and chairs that you need, buy your supplies and hire your cooks, servers, etc. You advertise and open your doors.

Let's say that:

• You spend RM500,000 buying the building and the equipment.
• In the first year, you spend RM250,000 on supplies, food and for your employees.
• At the end of your first year, you add up all of the money you have received from customers and find that your total income is RM300,000.

Since you have made RM300,000 and paid out the RM250,000 for expenses, your net profit is:

RM300,000 (income) - RM250,000 (expense) = RM50,000 (profit)

At the end of the second year, you bring in RM325,000 and your expenses remain­ the same, for a net profit of RM75,000. At this point, you decide that you want to sell the business.

What is it worth?

­One way to look at it is to say that the business is "worth" RM500,000. If you close the restaurant, you can sell the building, the equipment and everything else and get RM500,000. This is a simplification, of course -- the building probably went up in value, and the equipment went down because it is now used. Let's just say that things balance out to RM500,000. This is the asset value, or book value, of the business -- the value of all of the business's assets if you sold them outright today.

Selling Shares

­ If you keep the restaurant going, it will probably make at least RM75,000 this year -- you know that from your history with the business.

Therefore, you can think of the restaurant as an investment that will pay out something like RM75,000 in interest every year.

Looking at it that way, someone might be willing to pay RM750,000 for the restaurant, as a RM75,000 return per year on a RM750,000 investment represents a 10-percent rate of return.

Someone might even be willing to pay RM1,500,000, which represents a 5-percent rate of return, or more if he or she thought that the restaurant's income would grow and increase earnings over time at a rate faster than the rate of inflation.

The restaurant's owner, therefore, will set the price accordingly. You might price the restaurant at RM1,500,000. What if 10 people come to you and say, "Wow, I would like to buy your restaurant but I don't have RM1,500,000." You might want to somehow divide your restaurant into 10 equal pieces and sell each piece for RM150,000.

In other words, you might sell shares in the restaurant. Then, each person who bought a share would receive 1/10 of the profits at the end of the year, and each person would have one out of 10 votes in any business decisions.

Or, you might divide ownership up into 1,500 shares and sell each share for RM1,000 to make the price something that more people could afford. Or, you might divide ownership up into 3,000 shares, keep 1,500 for yourself, and sell the remaining shares for RM500 each. That way, you retain a majority of the shares (and therefore the votes) and remain in control of the restaurant while sharing the profit with other people.

In the meantime, you get to put RM750,000 in the bank when you sell the 1,500 shares to other people.

Stock, at its core, is really that simple. It represents ownership of a company's assets and profits. A dividend on a share of stock represents that share's portion of the company's profits, generally dispersed yearly.

If the restaurant has 10 owners, each owning one share of stock, and the restaurant makes RM75,000 in profit during the year, then each owner gets a dividend of RM7,500.

One measure of the value of a company, at least as far as investors are concerned, is the product of the number of outstanding shares multiplied by the share price. This value is called the capitalization of the company.

How to Monitor Stocks.

Buying stock in a company is relatively easy once you've researched the stocks you're interested in and have a broker or brokerage account to handle your purchase.

Choose your stocks with care and research before you buy anything, but keep in mind that the stock market could crash at any time for numerous reasons.

Monitoring the rising and falling prices of stocks is an essential part of being a successful investor or stock trader.

Rotate stock to keep the old stock moving out first and the fresh stock going out last. If you do not rotate stock, then older stock will expire and you must throw it away.

This costs money to the person throwing away the items so, prevent waste with stock rotation.

How to Get Started in the Stock Market...........

Perhaps you have been eyeing a stock for a long time but just can't seem to find a good entry point.

You've been waiting for weeks or maybe months for a stock to finally find a bottom, but you are never quite sure.

When the stock falls and you are on the brink of buying, it seems to go still lower. Spotting a bottom in a stock can be quite difficult, and some of it does depend on luck.

However, a better indication than luck is skill, and the art of finding a bottom in a stock can be learned.

The stock market can be a valuable tool for gaining more income as well as strengthening your insight into the world of business.

Playing the stock market is usually reserved for stock market analysts and financial planners but the average person can learn the stock market just as well as the professionals.

Get started in the stock market and start managing your own financial portfolio with the ease of a learned pro.

Many people worldwide own stocks and have their financial security relying on their success, but not everyone is familiar with
the basic tenets of the stock market.

Stocks are units of ownership sold by a company when it switches
from private ownership to a publicly traded company.

Stock investing is an imperfect science requiring patience
and diligence, but you can also make a fortune if you do it right.

CNY HOLIDAY 2010 - Market higher on active buying

Buying interest was active across the board on rising optimism of a recovery in the global economy, said an analyst.

The marke's attention was also on the subdued inflation in China.
"All this good news helped bring buyers back into the markets," the analyst said, adding that regional markets also performed well after Europe's pledge to help Greece out of its debt crisis.

However, the market volume was thin ahead of the extended weekend. Bursa Malaysia will reopen on Wednesday after the Chinese New Year holiday.

The Finance Index rose 62.05 points to 10,946.04, the Industrial Index increased 11.63 points to 2,588.07 and the Plantation Index was up 17.35 points to 6,204.5.

The FBM Emas Index gained 38.74 points to 8,436.33, the FBM70 Index was up 53.58 points to 8,281.51 and the FBM ACE Index rose 71.76 points to 4,328.97.

Market breadth was positive with gainers thrashing decliners 479 to 142 while 241 counters were unchanged, 467 untraded and 26 others suspended.

Total volume decreased to 560.587 million shares worth RM811.432 million from 646.353 million shares worth RM881.907 million yesterday.

Of heavyweights, Sime Darby was up two sen to RM8.40, Maybank added seven sen to RM6.90, CIMB Group increased six sen to RM12.42, IOI Corporation rose one sen to RM5.22 but Maxis fell two sen to RM5.38.

Among major gainers, Nestle rose 64 sen to RM33.80, KKB Engineering increased 45 sen to RM3.85, Malaysia Smelting Corporation went up 43 sen to RM3.80, Goh Ban Huat moved up 30 sen to RM2.00 and Hai-O Enterprise increased 28 sen to RM9.10.

The FBM KLCI futures contract on Bursa Malaysia Derivatives closed lower, dealers said.

Spot month February 2010 fell 7.5 points to 1,244.5, March 2010 lost 3.5 points to 1,242.5, June 2010 dropped 3.0 points to 1,238.5 and September 2010 declined 3.5 points to 1,233.0.

Turnover, however, was higher at 4,863 lots compared with 4,510 lots on Thursday while open interest rose to 18,209 contracts from 17,973 contracts previously.

Right time to buy shares.................

It may take nerves of steel, but some investment pros are already telling their clients to start buying shares.

'We encourage investors to use this correction as a buying opportunity,' say experts.

Fund managers have been licking their lips at the prospect of picking up some tasty bargains.

First of all, do research on the company you trying to buy shares of stock.
When you buy shares of stock, don't buy all in once, try to buy in sequence. If you have faith in the company but the price is keep dropping, buy more! if it keeps dropping and you lose 10% of the value, get out and take your loss.

It's always good to hold a stock long term unless there is a serious problem with the company. Although, you might get a lot of profit by buying stocks before their earning, but you can also lose much money if the report is not great.
Never get into over stocks if you already miss the boat.

Don't be greedy, once you think you reach your goal, sell it. Remember that Sheep get sheered; Pigs get fat; but Hogs get slaughtered.