One person who takes a lot of risks in the stock market is the market maker or the company he works for. What is a market maker? Learn more about how the investment world works to understand where your money is going and when it is safest to invest.
Financial Security in a Fast Moving Market
Investment is a lottery in many ways, but there is a strategy for remaining in the black. Stick with predictable shares. In other words, though it is tempting to risk a lot to secure a wealthy return, there are no guarantees that this risk will yield fruit. You might just get a load of wormy apples if a share does not perform well. The money maker on the floor buying shares from companies to get them ready for sale will also have to charge customers more for shares in unpredictable companies. Paying more is fine if the market goes their way and they make a considerable return on their investment. If their corner of the market takes a dramatic downward turn, the investor loses big, and the money maker also loses.
To remain financially secure, consumers are best to stick with major players. These include the big names they recognize, such as department store chains, fast food restaurants, energy suppliers, computer giants, and communications firms. They float millions of shares worth billions of dollars.
In this case, buyers and sellers are always active. Finding one or the other is not a challenge, even if the figures are constantly up and down.
Investment for Beginners
Investors who are just building a portfolio and getting a feel for the market are advised to stick with large, predictable shares. Crashes happen, and they happen to big companies as much as to little ones, but there is still a certain amount of security in owning a few shares among millions.
When investors become more confident or they have a bit of money they can afford to lose, they will start to do their own research and dabble in small companies with big possibilities. It sometimes happens that a little firm only recently gone public will suddenly expand to the point where a $10 share is worth $100. If you hold 1,000 of those, you just made yourself a big profit. So did the money maker who charged extra to buy and sell these shares. If the company folds, you (and he) just lost a solid wedge of money, which is why only experienced investors want to play this game.