Learn How to Clear Your Bad Credit History in 37 Days

A bad credit card history hinders you from getting good interest rates for everything – from  your house loan mortgage to your car loan, to everything.

Learn how to clear your bad credit card history in 37 days.

Understanding The Stock Market

The stock market is where the shares in companies are bought and sold, providing companies options to access capital, and investors opportunities to own a share of the company and enjoy potential gains from the company’s future performance. When you own a share of a company, you own a portion of the company. If the company makes profits, then the value of the share that you own rises, and vice verse if the company doesn’t make a profit.

The stock market offers people the opportunity to generate a separate income stream apart from their daily jobs, or income streams which are usually higher than leaving money in savings deposit accounts. But before you even think about buying and selling shares, you must know the fundamentals of the stock market and of trading.

Stock Exchange

You can only invest in stocks through a stock exchange, an organized marketplace where stocks are bought and sold under strict rules, regulations and guidelines. The most famous stock exhanges are the NYSE (New York Stock Exchange), FTSE International (London), Tokyo Stock Exchange and many more. The Malaysian stock exchange is called Bursa Malaysia. Bursa Malaysia has over 1,000 listed companies offering a wide range of investment choices to local and global investors.

Why Do Companies List on the Stock Market

The Stock Market was created by companies wishing to raise capital for their business. When someone says they have a listed company, it usually mean the company is listed on the stock exchange. All companies need cash to take advantage of growth opportunities. Many start-up companies however find themselves short of capital to fund expansion. One way to acquire this cash is to publicly float the company. This involves selling part of the company to private individual and institutional investors who are then able to freely exchange these stocks on an open market. Purchasing stocks in a company that is listed on the stock market is done through an Initial Public Offering (IPO).

Once an IPO has been issued, you can contact the company (phone, fax or email) for a copy of the Prospectus and complete the application to apply for an allocation of shares. Or you can wait until the company is floated and buy shares on the open market. Besides the stock exchange, stock brokers will also have information regarding IPO’s.

Companies that are already listed can also raise additional money on the stock market by offering existing stockholders the opportunity to buy more stocks in the company. For example, a listed company wanting to raise additional capital might issue one new share at 5 cents each for every three shares an existing investor owns.

When you buy shares of a company, you are buying a portion of that company. When the company makes a profit, your share in that profit is in the form of a higher share price or a dividend. Typically, the number of shares that have been issued multiplied by the share price gives us how much a company is worth. Similarly, the value of the shares you hold is the share price multiplied by the number of shares your hold.

How to Make Your Money Work for You.

“Make your money for you.”

We’ve all heard of this phrase many times but what does it really mean? “Make your money for you” means using your money to get more money. We get money by trading our time for money. And we store the money in a bank account. With current interest rates, you wont get much interest on your money and your money will not grow fast.

However, investing is a way of making your money work for you at a quicker rate. Investing in stocks has consistently proven to be one of the most profitable forms of investment available. The other avenues for investing are unit trust or mutual funds, bonds, property auctions and so forth.

Benefits of investing in the stock market

• Immediate Buy/Sell so you can sell part of your investment any time.
• Very low transaction cost.
• The freedom to work at your own place, at your pace in your own time.
• Easy monitoring — log in to the market from anywhere in the world.
• Being able to maximise returns whilst spreading your risk.
• A predictable form of investment if you know what you’re doing.
• Putting you in control and freeing you of fund management fees.
• Considerable tax advantages.

Things to be ware of:

• The market can be a volatile place.
• You must acquire knowledge of what you are doing.
• You must monitor your investments.
• You must learn the discipline to enter and exit the market on entry and exit signals.

Can Ordinary People Profit from the Stock Market?
Many people say things like “I’d love to get into the stock market” or “If I had more money, I’d invest in stocks”. Many people also believe that to make a profit from the stock market you either need to be rich already, be a full-time investment trader or be a financial whiz.

Far from it!

Investing in the stock market is a simple process. Just like everything else in life, there are risks you should be aware off.

Here are some examples of investing in the stock market.

Scenario 1:
Jonathan works in a manufacturing plant earning USD33,000 a year. After rent, living and personal expenses, Jonathan has managed to save USD1,500 over the past 6 months that he wants to invest in the stock market. Jonathan buys 1,600 shares in Enron at USD0.90 per share (USD1,440). He also pays USD32.95 brokerage fees for buying the shares. In total, Jonathan has invested USD1,472.95.

Six months later Jonathan decides to sell his shares. He has kept an eye on the performance of Enron and they have risen to USD1.19 a share. Jonathan sells his shares for USD1,904. He also pays USD32.95 brokerage fees for selling his shares, leaving him with USD1,871.05. That is a profit of USD398.10.

USD398.10 may not sound a lot, but remember, Jonathan only invested USD1,472.95 for 6 months, so he won’t make a huge return. Nevertheless, Jonathan made a 27% profit which is far better than he would have made by putting the money into his savings account.

Scenario 2:
James and Samatha both work full-time in professional jobs. Together, they earn USD120,000 per year. After mortgage repayments, living and personal expenses James and Samatha have managed to put away USD5,000 that they want to now invest in the stock market. They buy 1,500 shares in Exxon Mobil at USD1.48 a share (USD2,220) and 1,500 shares in Shell at USD1.33 a share (USD1,995). They also pay USD65.90 brokerage fees for the two transactions. Their total outlay is USD4,280.90.

Over the next 12 months Exxon Mobil shares have risen to USD2.60 a share and Shell shares have moved to only USD1.38 a share. James and Samatha sell their shares for a total of USD5970. They pay their broker USD65.90 and are left with USD5904.10. Their initial investment was USD4,280.90. So, they make a profit of USD1,623.20.

These examples show that investing in the stock market is a relatively simple process. However, one should always take a prudent approach when investing in the stock market. Never listen to rumours. Always do your homework, which is to study the background of the companies that you’re investing into.

I will explain more about investing in the stock market in the next post.

The Secret

There is no secret to getting out of debt. You’ve read this in many places before but I want to repeat it here:

1. Spend less than you earn.

2. Live frugally.

3. Earn more money.

4. Manage your money wisely.

There are no other rules.

The key to breaking out of your debt is to earn more money. Living frugally and within means is your first step. But if you want to escape the cycle of poverty, polish up one of your skills and be bold enough to go out there and sell your skills. There are a lot of websites like Elance.com where you can offer your skills at a rate and people will employ you if the terms are good.