A. SOME TERMINOLOGY & THINGS TO KNOW:
1. TRADING is buying and selling.
2. A REAL ASSET is something physical, like gold, land or a house.
3 A SECURITY is a FINANCIAL DOCUMENT representing ownership in a real asset or another security. Securities can be bought and sold.
4. SECURITIZATION is the formation of a relationship between a security & real assets or a security that bundles other securities into one.
In the former case, a security that represents immediate ownership in real assets can be called a BASIC 1ST LEVEL SECURITY. STOCKS are 1st level securities because they give immediate ownership to real assets. COLLATERALIZED LOANS are quasi 1st level securities, because they are backed by real assets, meaning if the borrower defaults on the terms of the loan, then he can be forced to transfer his ownership in those real assets to the lender.
In the latter case, where a security bundles other securities together . these securities are collectively called MULTI-LAYERED NESTED SECURITIES. STOCK INDEXES (like the DOW & SP500) tend to be 2ND LEVEL SECURITIES. Investing in securities that go beyond 2 levels is highly discouraged.
5. STOCKS are securities giving evidence of ownership in things like a business entity.
6. LOANS are IOUS (aka, NOTES or BONDS) .
COLLATERALIZED LOANS are SECURED LOANS.
Without being collateralized, ie, backed by real assets, loans are UNSECURED LOANS.
Regardless, loans may or may not pay a one-time simple or a repetitive periodic INTEREST based upon the amount of the PRINCIPLE & duration of the loan.
7. The government borrows on its good looks alone.
The DOLLAR is a government unsecured IOU/LOAN that does not pay interest. The value of the dollar depends upon its economic scarcity in relation to the availability of goods and services.
.INFLATION occurs when there are too many dollars in relation to the availability of good and services. DEFLATION is the opposite. The best defense against inflation is ownership of real assets.
The FEDERAL RESERVE BANK will attempt to curb excessive inflation by raising interest rates. This is done by specifying a higher inter-bank transfer rate or by selling off government bonds for a cheaper price, thereby increasing their effective interest rate which varies inversely with .price. But the Fed Reserve Bank normally tolerates some small periodic inflation.
A TREASURY BOND is a government unsecured IOU/LOAN that does pay interest. It’s distribution is encouraged by the Fed Reserve Bank who buys new issues of federal government bonds by creating a book keeping entree that credits the federal governments account with cash, while making an off setting debit entree to its own account with the value of the alleged purchase. It is a really astonishing hocus pocus of book keeping. Anyway, they then proceed to sell the bonds for a price which inversely impacts the effective interest rate of the bonds.
B. THINGS TO DO & NOT DO.
1. Don’t think you can make a killing or a living in the stock market, unless you become a stock broker.
2. Do not spend more than you can afford to lose.
3. Do not borrow to buy.
4. Observe the economic environment. Are interest rates rising, falling or flat?
Is the value of the dollar rising or falling?
Are people trading wisely or not? Are they borrowing money to invest, & if so do they have the asset resources to pay for their borrowing in case of a market failure? Go to a stock brokers web site & monitor the DOW JONES INDEX & SP500 INDEX, along with other indexes by pulling up their price history charts and observing trading trends going back at different points in time. Are prices rising, falling or just flat. A good economic trading environment is usually indicated by slightly upward trends. But beware of radical price swings, because they indicate a potential market malady. You will hear terms like “BULL” or “BEAR” to describe market conditions, indicating a lot of people are buying or selling. It boils down to the more, the merrier. The fewer, the less happier.
(For more info on “how to”, go to the next section.)
5. And monitor the security you are interested in buying or selling, observing the same trends as previously described.
6. When buying, wait until there is a small dip after reaching a peak, thereby assuring there are prospective traders in the security out there who might take a small loss in the security if the price drops from the peak at which they bought it.
7. When selling, put you sell price half way between the price you bought it and the most recent peak higher than when you bought it.
8. In both buying and selling, use LIMIT TRADES where you set the maximum price you will pay in a buy or the minimum price you will accept in a sell.
9. And by all means, do not buy any MULTI-LAYERED NESTED SECURITIES.
C. THE INS & OUTS OF SECURITIES TRADING.
1. THE ELEMENTS OF SECURITIES TRADING.
a. The EXCHANGE is the actual physical market place where securities are traded on the exchange floor between buyer and seller agents during on work days (M-F) during normal working hours.
b. A SECURITIES BROKER is an agent who represents a buyer or seller in dealing with the exchange and places orders with the exchange. Most brokers now have web sites providing detail price info and trader ordering processing services for a small commission.
2. HOW TO PLACE AN ORDER. (Minors under 18 not permitted)
Since you are reading this post, you are already connected to the internet and half way there. Simply find a broker’s website and create an account the same as you would in accessing a social web site. The broker’s website should provide all the tools you need for selecting and ordering specific securities trading.
Since investment banks hire brokers, you may have to go to the investment bank’s web site. Important to note that an investment bank should not be considered to be the same as a regular bank, since the 2008 crash was ultimately caused by the Lehman Brothers & Bear Stearns investment banks bad practices of buying more than they had in real assets to backup/cover.
https://en.wikipedia.org/wiki/Lehman_Brothers
And even though real estate is a sound investment, the investor needs to be careful of REITS, REAL ESTATE INVESTMENT TRUSTS, because there are some really bad characters out there.