Insufficient Financial Knowledge

I l @ ve RuBoard

Insufficient Financial Knowledge

Not understanding the workings of financial markets, such as the stock market, is comparable to not understanding financial terms, but the potential for getting into trouble is much greater. A lack of knowledge when you invest in the stock market can get you financially wiped out. Here are two tips for obtaining the knowledge needed to be a successful investor:

  1. Up to now you have probably had little or no reason to learn about the workings of the stock market. Until the time I decided to take sky diving lessons, I couldn't have told you at what altitude the cord must be pulled. Before I took my first plunge, however, I assure you I was very sure of when I was supposed to pull my chute. In much the same fashion, you should learn everything you can before taking the investment plunge.

  2. As with the technical terms, you only have to learn the workings of those investments that pertain to you.

TIP

If you feel intimidated by financial information, the best way to deal with it is to casually scan through the financial media. Pick up a copy of The Wall Street Journal or watch Moneyline on TV. You'll be surprised to discover that you understand a lot more than you thought you would.


This book is designed to explain the internal processes of the stock market that are relevant to you the investor. It will not overwhelm you with extraneous information but instead will give you the essential information you need to know to get started as an investor. Over the years I have learned such informational tidbits regarding the workings of the stock market as how stocks are coded into various classes, how trades are settled, and how to recognize the various functions of the floor traders from the colors of their coats. All of this is certainly interesting and often fun information; however, the color of a floor trader 's coat will in no way help you make intelligent investment decisions.

There's an old phrase that sums up expertise quite nicely , "Everything is easy if you know how." With that in mind, this book attempts to explain some of the more esoteric functions in terms and with examples that are familiar to the average person. The real responsibility of understanding these functions, however, is up to you, the individual investor. This is important because, as like any industry, the stock market has unscrupulous people who prey on uninformed investors. The golden rule of investing, therefore, is "Know what you are getting yourself into." Only by arming yourself with knowledge can you ensure that you will not be taken advantage of or make a bad decision.

It's Not That Difficult

Fortunately, expanding your financial knowledge is not hard. Repeated exposure will make many of these things increasingly familiar. So, here are some good ways to increase your knowledge:

  • Listen to the financial news.

  • Look at the stock pages.

  • Check out financial Web sites.

Do these activities even when you do not understand what is being discussed. Initially, this may prove a little frustrating, but over time you will begin to develop an understanding that will become your knowledge base. Soon you will be able to ask the appropriate questions needed to gain a fuller understanding.

In addition, don't try to learn every aspect of every financial vehicle in every market in the world. The terminology is massive, because the financial marketplace itself is massive. Start out small and work your way up. The focus of this book is stocks and their corresponding markets. Save learning about the bond market until next week and foreign currency exchanges until the week after that. Eventually it'll all come, you'll see.

CAUTION

Remember that your own money is on the line. If an investment is worth your hard-earned cash, then it's certainly worth taking the time to understand all the information available on your investment.


Finally, and most important, if you don't understand something, either look it up or ask. It is absolutely imperative that when you first learn about the stock market, or the greater financial community, that you fully understand the basics. Subsequent information will grow increasingly complex and most, if not all, of that information will be based on the assumption that you are already familiar with the more basic processes. If you are not, the potential for disaster is greatly increased. Also, even in the more complex processes, ask for clarification of anything you don't understand. Chances are if you don't understand it, others haven't understood it either.

I l @ ve RuBoard


Stock Market Investing 10 Minute Guide
Stock Market Investing 10 Minute Guide
ISBN: 0028636104
EAN: 2147483647
Year: 2000
Pages: 130
Authors: Alex Saenz

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