The Ground Rules of stock market education

The stock market is an incredibly complex entity. Trading that happens through Wall Street has further reaching consequences than the average person knows. Scratching beneath the surface it becomes easy to see just how broad the influences of the stock market are, though. Trades that happen in the United States can be motivated by events that happen in China. The stock market is in many ways a monetary representation of the interactions of the global community. Following it takes consistent research and perseverance. That is why people looking to just get involved in the stock market have their work cut out for them.

There are some ground rules that new investors can use to help guide them along their way as they familiarize themselves with the market, however. Traders all over the world use the DOW-Jones as a representation of the market in its current state. More commonly known as the DOW, this stock value represents the thirty highest grossing stock values in the market. The reason that the DOW is important to investors of all calibers is, because larger companies tend to beget smaller companies in a manner of speaking. The success of overarching corporate giants generally correlates to increased earnings for smaller businesses.

On the other hand, the DOW is comprised of highly valued stocks. The majority of investors build their portfolio starting with smaller companies. Publicly traded smaller companies are sometimes called penny stocks, because the value of their shares is so low. These stocks are usually tied to a very niche market. Investing in one of these companies means doing a lot of background research or hiring a portfolio manager to do so. Still, the potential for growth with these companies is where the majority of investors make their earnings. In many ways these companies are the glue that hold the major pieces of the market together.

The market is not so simple that it can just be divided into two levels, though. Traders learn through trial and error how different pieces of the market interact with one another. To get a more complete stock market education one has to begin to understand the way that outside factors such as trade deals, tax laws, and politics can influence the market.