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How does investing in the stock market work? When I buy a share in a company, how do I sell it? How do people lose money in the market? Any other information?

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Jared’s, CareerVillage.org Team Answer

The process would be different if you're trading individually vs. if you were trading on behalf of a company or for your employer. Assuming you're asking about the process if you are an individual, you'd most likely buy and sell stocks using an account you have with a brokerage company like Charles Schwab, E*Trade, or any of a large number of others. You'd log into your account, where you'd see your account balance and a link to trade stocks. When you buy a share in a company, you'll usually be buying at a price determined by "the market" which is the price you'd see on a finance website like finance.yahoo.com (I'm oversimplifying here quite a lot, to keep things simple, and I'm sort of sidestepping defining what the market is, but be forewarned that there's a lot of details and little changes you can make to how you do this). When you sell a share, you'll be selling at the price the market offers again. If the price you sell at is below the price you bought at, you'd have lost money on that trade.

Example:
January 1st, 2020: You bought a share in a company. The price was $10 per share. It costs you $10.
June 1st, 2020: You sold the share. The price went down to $8 per share. You got $8 back into your account.
The result would be that you used to have $10 in cash, but now you have only $8 in cash. You lost money on that trade. Oh and also, the brokerage company you used charged you $1 every time you traded as a fee, so actually you lost another $2 to fees, so you actually only have $6 in your account. Obviously, all of this math would be reversed if you were selling at a price higher than the price you bought at (making money on your trades). And in case you're making money, you also need to learn about taxes and inflation and other stuff.

Also: just in case it's a little confusing who you're buying from and selling to (it was confusing for me when I first was learning about this)... you are always buying from *someone* and selling to *someone*, even though it's almost never transparent to you who you're buying from or selling to. Typically a company's shares are being bought and sold virtually constantly in transactions both large (many shares) and small (few shares). Your broker will be keeping an eye on the offers to buy or sell out there and combining your offer in with the others to "clear" the market. This used to be done by hand (with real human beings handling all of the "clearing") but now it's happening with computers doing almost all the work and doing it much faster than ever before. So your brokerage company will just say "trade done!" and you'll know that you bought or sold, but probably not know who to or from.

Everything I'm sharing above is a pretty big simplification of it all. I'm just sharing how one individual might experience the buying and selling process. But there are many other ways to invest, including investing in different types of "assets" (stocks are often called "equity", but you can also buy and sell other types of things such as exchange traded funds or debt or real estate or others), and you can invest with different terms (for example using options), and you can also invest using brokers you call on the phone (instead of using an app) or use a "robo-advisor". There are a lot of different options out there!

It sounds like you're interested in learning more about investing, which is something I really was curious about as well when I was younger (especially in High School). You might want to checkout occupations in the Financial Services industry -- there are a huge number of jobs in and around the financial markets, including things that get you right up close to the markets (commodities trading for example) and others that interact with the financial markets from a further distance (maybe working in the finance department of a large company, for example, which might lead to changes in your company's financing strategy based on changes in the financial markets). If you decide to go to college and your college has a business program you can also look into whether you can major in or study finance. I majored in finance in college (after switching from other majors) and found it to be really intellectually fascinating (a lot more theory involved than I expected!).

Source: I've bought and sold shares in companies as an individual. I got my undergraduate degree in finance. However, I've never been a broker or dealer.

Jared, CareerVillage.org Team recommends the following next steps:

Watch this great Kurzgesagt video: How The Stock Exchange Works https://www.youtube.com/watch?v=F3QpgXBtDeo
Make a list of 10 occupations that have to do with the financial markets
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Gabriel’s Answer

In addition to the procedure on investing in the stock market mentioned by @Jared above, I would also like to point out the risks that you may also like to know:

Choosing a Broker
You need to first open a trading account with a broker. Brokers typically charge you a transaction fee based on the amount you trade. The transaction fees can be quite different across brokers. Like a bank, a broker will hold your money and stock on your behalf, so its credibility important as well.

Trade on Margin
Broker usually offers credit line for you to trade more than the cash you put in the account. E.g. you put $100 with the broker, but you can possibly buy $200 worth of stocks. Broker will charge you interest on the money. Moreover, you are leveraging your investment, so both your upside and downside can be amplified. If you want to trade on margin, please make sure you understand your potential risk exposure.

Other Securities
In addition to stocks, you can also trade other stock-like products, such as ETF and REITS. The transaction steps are similar, but the underlying assets would be different. This means buying those securities may expose you to risks more than just one company.
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Steven’s Answer

How does investing in the stock market work? When I buy a share in a company, how do I sell it? How do people lose money in the market? Any other information?


First you have to go to a broker. Then you can buy and sell when you want. Depending on type of brokerage account in may be a taxable event. Most people lose by getting in stocks at bad prices and being impatient. Most people lose from panic selling (selling too early) and risking more than they can afford. Research Warren Buffet and Ray Diallo
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lewei’s Answer

My experience is find good company of cause it must be a public market trading object in NASDAQ or NYE, don't touch pink stocks, 99% of them are fraud and liars, it is hard to find gold in sands, so don't it, in the public market it would be easier.
If you don't want to do trading for life just to look for a good investment, do the long side, never short, good company from a long period of time it offers good return if you want to stay with it.
there is saying 'I gain you lost' game in the market, that's for people in the WALL Streets trading for life game, don't try to jump into that if you don't understand the rule and principle yet.
good company would eventually honor your investment just no that rush, investment and stay with good company is like be with a pregnant woman, it takes longer to see the progress, but you will get your return.
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