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Intro to Investing
by Chris Stallman
President, Young Investor Monthly |
Did you know that investing has been around for
over 200 years? In 1792, twenty-four men entered a room and signed a paper that said they
would sell parts of companies among themselves and others. The parts of the
companies were sold in the form of stocks. This marked the beginning of the stock market.
Although times have changed greatly in the last 200 years, the ideas of investing have
basically remained the same. People still buy and sell stocks, bonds, and mutual funds.
Have you ever really wondered exactly how buying and selling stocks works? Ok, let's say
that you have this feeling that McDonalds is going to go up soon. You, the young investor,
remember that you have $350 that you have saved from Christmas presents, birthday
presents, gifts, allowances, and whatever else you may have gotten the money from. You
decide to invest in McDonalds so you would go to a person called a broker and tell them to
buy stock in McDonalds. "Sure, I'll buy $325 worth of McDonalds and keep $25
for my commission," says the broker. Congratulations, you have just bought some
stock!
But what happens to the money I gave the broker? That's a good question. Well,
after the broker takes your money, he puts in an order on his computer that is sent to the
stock exchange. The order was given to a person called a floor broker. This
person sees the order and runs to the area of the stock exchange where McDonalds stock is
being bought and sold. He finds someone who is selling stock in McDonalds and buys the
stock from that person. He then rushes back to one of the many computers and reports the
trade. The report goes back to the broker and you are given ownership of the stock.
Next: Compounding
Chris publishes a monthly newsletter called Young
Investor Monthly that helps teach and encourage young adults to start investing. Visit the
site at www.youngmonthly.com
and sign up for a free copy. |
