Stocks and bonds are scary, scams everywhere and the realm of financials gurus or vultures that swoop down and perform aggressive take overs on small airlines to dump the company and grab the employees cash tied up in the company managed retirement savings. I guess that pretty much sums up my youthful understanding of the world of stocks and shares and of course I borrow the story theme from the movie, Wall Street. But at the end of the day this strange world is not very strange at all. There are only a few terms or jargon we need to understand to start gaining a better picture of what they, (those who cloak the business in a arrogant mist for personal gain) are talking about and yes, small guys can make a buck if they are careful and undertake some personal training.

To begin the understanding of stocks and bonds we need to know what we are going to do if decide to get into stocks. At its core it is very simple; we are going to make an investment of money. By definition to invest is to actively use money to make more money. When I first heard that if I learn to invest my money could work and make money for me I was very happy. I was happy because as much as I like work I can only do so much and would very much appreciate any help I can get. Other investments we can make would include buying a property and renting it out, buying a foreign currency (forex or foreign exchange market) and sticking it a bank to earn interest the forex, plonking a wad of money into mutual funds (just a big pool of many people's money managed by a group of people who usually know what they are doing and manage to pay some money back to all the people investing) and of course we can give our money to an entrepreneur who needs some money to get a business going and in return expect our friend to give us a legal share of the company. There is that word share again. Same word same intent but just a little different.

Although having a percentage share in a friend's private company and buying a share on the public stock exchange is essentially the same thing, there are differences. The differences between making a deal with a friend to hand over some money to start a business and in return owning a "share " of that friend's company (and of course a share of any profits made) from buying a "share" on the stock exchange are mostly associated with the government regulations surrounding the deal, the number of people involved, the liquidity (ok sorry how easy it is to sell the share for cash) and the rights you get to have a say in the operation of the company. The laws surrounding the establishment of a partnership are reasonably flexible and will in most cases be able to accommodate the private desires of the partners who wish to join together and do business. When it comes to the establishment of the partnering relationship created when you buy a share on the public stock exchange the laws are however very strict and the partners and company must make themselves fit into the government shape provided. If we ask why the large difference in regulations the answer is easy. At the private partnership level one is supposed to use ones own brains and take appropriate care not to get ripped off. At the private level we are supposed to check our self if we are about to tie up with a person who has no idea how to make money from or run a business. However, when it comes to buying a share on the stock exchange, we know that these stocks are being offered to the entire general public of the world. This is when we see governments stepping in and doing their very best to provide some safety for the folk who have no idea what they are doing but still buy shares. The regulations include very tight rules on what a company has to do before it can even apply to become listed on the stock exchange. These same regulations make the company jump through some very tough hoops before they will be granted permission to sell shares and then the rules go on to say how the company conducts its business affairs.

If we decide we want to buy a share in a publicly traded company it's really easy. If you want to buy clothes you go to a department store. If you want to buy stocks / shares you must go to the stock exchange. We call the buying and selling of stocks "trading stocks" and you can trade stocks on the internet or have a salesperson (broker) handle it for you. Be sure though that whether you use the net or a broker eventually a real person is going to walk up to another real person on the floor of a stock exchange and a little chat like this will take place,

"hey I want to buy 100 shares in upshegoes company, how much"

"mmm let me see, Upshegoes company you say, how about this much"

"too much discount please"

"mm, OK how about this much"

"Done, thanks, see you gotta go tell my client"

We can make money by investing in stocks in a couple of ways. We can earn money when the company we have shares/stocks in makes a profit. When publicly traded companies make a profit a percentage of the profit can be distributed to the shareholders. Another way to make money that is more commonly understood is to buy cheap and sell high. I used the term liquidity before and this one of the beauties of publicly traded stocks. They are being traded all the time and in many cases the same company sees its shares change hands daily. You as a share holder can tell the market you want to sell or you can tell it you want to buy more. So as long as you own good shares / stocks whenever you run low on cash in your day to day life you can sell some shares pretty quickly, quickly can mean within hours if the stock is really good. Of course if you buy rubbish stock you may never be able to sell it and even worse if the company you bought into goes broke the stock will become worthless.

Well that's about it. We know what a stock is. What the stock exchange is. We know we can buy and sell shares. We know that it's a heavily regulated business. We know we can make money by investing in the stocks of companies that have decided to move from being 100% privately owned over to being owned by the public. I will be writing more on this subject and the articles will of course move into the area of assessing and buying shares.

If you think you can read what I have to say you are welcome to read my other articles as I write them. Just register as one of the monitor fans before you leave hubpages. Not sure I like that term fans but I didn't chose it they did. O.K. take it easy out there.