Expert: Gina Boykin - 7/13/2009

Question
Hi Gina!I dont know anything about stock market and foreign exchange but i want to understand this and start investing.Can you help in some way?

Answer
I can definitely give you some good places to start, since these markets can't be summed up in just a few words:

Here's a quick summary, though, of the stock market:  If people really like a company, and think that it is going to do well in the future, they are willing to pay more for that company's stock.  When there is fear about the company's future (like when the U.S. auto companies were trying to avoid bankruptcy#, most people don't want the stock and the price goes down very rapidly.  There are some people who still have an interest in that company, but only if the price is right #very low#.

If you plan to buy and hold stock for a long time, you will be looking for companies that you believe will do well in the future.  You want stocks that will either be worth more later than they are today so you can make money when you sell them, or stocks where the company provides cash flow #in the form of dividends).

To learn more about the basics of stocks and investing, a great website is www.investopedia.com.  They have definitions for pretty much anything you can think of related to investing, as well as some tutorials.  Be patient, you won't learn everything in a day or even a week. It takes time.  Once you have learned more, you can practice using a "virtual stock market game" for free online.  There are several.  One is located at www.youngmoney.com.

The foreign exchange market is different from the stock market.  In this market, you are not buying part of a company, but buying currency.  There are other factors that affect currency values, such as interest rates and the country's economy.  I would suggest learning about the stock market first, because forex investing is more complicated and the explanations will include a lot of terms that you need to learn first through learning about the stock market. Once you get to that point, the best website is www.babypips.com.  It is about as basic as you can get.