The short answer is: a lot. What happens on Wall Street affects you on Main Street. We've come to understand this better as a result of the financial meltdown of 2008.
First of all, you have to understand that companies issue stocks, which is ownership of a percentage of their company. These stocks have value both in their resale value and in their quarterly profits (called dividends).
Stocks are traded on an open market such as the New York Stock Exchange or NASDAQ and their price is determined by supply and demand. If a company has an especially strong quarter, stock prices tend to rise and if the company is not performing well, stocks will fall.
For your purposes, let's say that you open an account with an online broker. You decide that you want to buy 1000 shares of General Motors. You are betting that GM's stock will go up in the months ahead due to the bail outs. Other people are deciding that they don't want GM's stock any longer and are willing to sell it. If the price is right for the buyer and seller, a sale occurs.
The stock market is like a sophisticated swap meet. There are buyers and sellers. When they reach a common ground, a transaction takes place. And that should give you a general understanding of the stock market.
The more we have, the less it seems. This driving principle is what keeps us running back to the stock market time and again. This is predictable because who wouldn't like to invest a small amount of money for great returns over a short period of time. However, before getting lured into the profits one must know the tricks of the trade, because in this domain great returns come with greater risks for the uneducated.
Before you get anxious and apprehensive, you should know that stock market is not as difficult as nuclear science or metaphysics and with experience and an overload of knowledge, one can easily make good for oneself. Interestingly, the stock market works on certain patterns and observing them over time can give one substantial insight into how the market may swell or fall. If you can predict a downfall then you can easily know that it is time for you to sell your shares. This ensures that even if, you have not made too much of a profit, you at least don't stand to lose anything. Before you consider opportunities to make money, the first thing you should do is - analyze your risks. One of the most important things one should start with is, adequate knowledge about the company that you are planning to invest in. If you plan to continue with a company for sometime, it is important for you to observe the trends of that organization.
Long Term Investing Is Here To Stay
The stock market is a fascinating zone and nothing beats adequate planning. Plan your capital investment and the longevity of each. Short term caps have higher risks but better returns, but it requires you to be on the ball all the time. If that is not your cup of tea, then diversify your principle into several stable companies over a long period of time so that the gains can accrue. With all of this in place, you can be sure that you'll always have more than you need to live and to survive.
