How the Stock Market Operates: Personal Finance, #1

By Kirk G. Meyer

Everyone needs to invest for their retirement and plan for the day that their retirement gets here or otherwise invest for the creation of wealth. The issue is most Americans have not saved very much for emergencies much less their retirement or wealth creation. Investing is not just an activity for the wealthy but rather anyone who takes the time to understand what it is they need. How the Stock Market Operates: A Guide to Understanding the Stock Markets is a comprehensive look at the basics of investing and how you can overcome any fears you may have about investments through the use of the stock market. Anyone can invest in the markets if they chose to and how is up to them as well. It is important that before anyone begin their investing career that they first understand the basics and what it takes to be a successful investor in the stock markets. This book will lay out the basics of the stock markets and make it easy for you to join this world of being a proactive investor to aid and protect your financial future. Get on top of your investments and start down the path to a financial state of freedom by reading How the Stock Market Operates: A Guide to Understanding the Stock Markets and buy your copy today.

• Language: English
• Publisher: Kirk G Meyer
• Release date: Jul 13, 2020
• ISBN: 9781393994718

Kirk G. Meyer

Kirk G. Meyer’s educational and work background is fairly diverse. Currently, Kirk is working on his Doctorate in Business Administration from William Howard Taft University. Kirk has completed an MS in Financial Planning from Bentley University in suburban Boston, Massachusetts and is now an investment advisor in the State of Tennessee in addition to working for the government in the area of contracts. Kirk also holds a BS in Business Administration from Haskell Indian Nations University in Lawrence, Kansas and an MBA and MS in Accounting from Strayer University in Washington, DC. Prior to Kirk’s current position Kirk was a bank examiner for a federal regulatory agency. In addition to Kirk’s education and work experience, he is also a registered independent life insurance agent in his home State of Tennessee, able to advise on various life insurance and annuity products to individuals and families in need of these types of services. Kirk’s educational background and love of helping others make him an asset to those looking for assistance and guidance in financial and personal financial matters. Kirk resides in Nashville, Tennessee with his lovely wife.

Book preview

How the Stock Market Operates:

A Guide to Understanding the Stock Markets

By

Kirk G. Meyer

How the Stock Market Operates:

A Guide to Understanding the Stock Markets

Copyright © 2017 by Kirk G. Meyer

All rights reserved. This includes the right to reproduce any portion of this book in any form.

Disclaimer: Every effort was made to describe the information in this book in an accurate manner as of the publication date. The author makes no guarantees regarding the information in this book.

Why I Wrote this Book

I wrote this book for one simple reason: most people are afraid of the stock market because they do not understand it. This book will take the markets and explain them in simple terms that anyone will understand and demystify the stock market. Yes, stocks can be daunting, but by understanding the markets in which they trade, you can master both the markets and the stocks that trade on them. No longer will you not understand what makes up the stock markets or how they basically work. Everyone needs to take advantage of the opportunities in the U.S. markets, and today, you are taking a positive step in that direction. Now, let’s get started in understanding the stock markets.

I wrote this book to assist and help others in the area of investments. As I stated earlier, it can be complex, or it can be simple in nature. The choice of which is up to you. However, in this book, we will take a simple approach to investments and try to make them understandable for everyone, not just those with advanced degrees or professional licenses. I have always taken anything complex in nature and reduced it to its simplest form. I have done this in my education as well as my professional life. While it’s not always easily achievable, it is something that makes things easier for me to understand and comprehend.

Investing does not need to be difficult and, in many instances, simple is actually better, as we will look at later. What makes me qualified to write such a book, you may ask? I have over 15 years of experience in financial areas with the Federal government covering a wide range of topics. Also, as far as my education, I hold a Master’s in Financial Planning, a Master’s in Accounting, and an MBA. I am educated in the formal sense, as well as having read countless books on finance and financial matters. All of this has allowed me to form a unique approach to investments that I think anyone can and will understand.

At the end of the book, I will explain how you will be able to gain access to my email newsletter and receive some free valuable gifts made available to those who purchase my books.

Table of Contents

Why I Wrote this Book

Table of Contents

Introduction

Is Investing Right for You?

Security Fundamentals

What goes into Making a Stock Market

The Market’s Historical Returns and Risks

Risk, Reward, and Asset Allocation

Factors that influence what you can make

Efficient Market Hypothesis

Selecting a Brokerage Firm

The Basics of Investing

Mistakes People Make and Trading Tips

Analyzing and Valuing a Corporation

Other Types of Equity Investments

Costs and Taxes

Tax-Sheltered Accounts

Initial Public Offerings or IPOs

The Markets and the Macro Economy

Conclusion

Thank You for Your Purchase

How to Contact Kirk G. Meyer

One Last Chance for the Free Gifts!

About Kirk G. Meyer

Other Books by Kirk G. Meyer

Introduction

Don’t gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don’t go up, don’t buy it. – Will Rogers

Are you interested in the stock markets? The chances are you must be if you bought and are reading this book. Regardless of where you are located in the world, these concepts will generally be the same as what is described here. In this book, we will focus on the United States’ stock market. What is the stock market? How does it operate and function? What makes it work so well? That and many other aspects of the stock markets will be covered in this book.

First, let’s get one thing out of the way. The stock market is not a quick solution to wealth creation. Are there people who invest and seem to make a lot of money in a short period of time? Of course, but they are not the norms in investing. What we will examine are ways in which you can create true wealth slowly and consistently. Please, just remember the old saying that if it is too good to be true, chances are it isn’t.

Second, why do people invest in stocks? Well, this is a little easier to explain — with stocks, the greater the risk, the greater the rewards. However, the opposite is also true — the greater the risks, the greater the chance of losing your hard-earned money. But no other asset class in modern history has enjoyed the returns that investing in stocks has provided. As with anything that makes or earns such profits, it attracts all types of investors. They can be short-term or long-term in nature. They can be bullish or bearish with their beliefs. Some are simple in their approach, while others are extremely sophisticated. Many people will use computers and software to examine and analyze stocks for hours on end. Others will read the current news and follow quarterly reports from the underlying companies.

All of these approaches and tactics are what keeps the markets flowing.  These practices also keep the individual stock’s prices in check and from getting out of balance, or in extreme cases, too far out of balance. By doing this, it allows everyday small investors to buy and sell stocks at decent price levels.

In this book, we will examine ways that will help the average investor invest with more confidence and authority. And for those who do not wish to invest in stocks, it will aid you in understanding the ins and outs of the markets, so when the time is right, you will be able to make an informed decision. What is contained here are time-tested methods that will stand the test of time and be valid in 20 or more years. Most importantly, it will give you the tools when you see an opportunity involving stocks to make the best decision as to whether the investment is a wise fit for you and your investment style.

Is Investing Right for You?

A big part of financial freedom is having your heart and mind free from worry about the what-ifs of life. - Suze Orman

This could be considered the $64,000 question that everyone must ask themselves. Is investing right for you? Just 20 years ago, investing was something that few people outside the wealthy would engage in due to the restrictions on entering the markets and the perception that investing was expensive. To a degree, these and other factors did limit people’s access to the markets compared to how easy it is today. With the advent of personal computers and the Internet, people now have easy access to the local markets and, in some instances, markets throughout the world. If you had told me just 20 years ago that people could sit at home and day trade for a living, I would have said that would have been unthinkable. Also, while people trading at home are at a disadvantage to institutional investors, it does not mean that they do indeed know how to trade and invest properly.

Here are some simple steps and tips for everyone who wants to invest in the markets to consider before joining the venture. First and foremost, do not try to beat the markets. There have been numerous studies on professional money managers whose job is to beat the markets and, guess what, more than 90% fail to do so consistently. Also, those who manage to beat the market for one year will almost always fail in the following years. Yes, it is that hard to do, so please do not try to beat the market. In my opinion, beating the market in today’s environment is more about luck than about someone’s skill set.

So why is it so difficult to beat the markets? The simple and basic explanation is competition from institutional investors. As prices go higher, people sell their securities and look for lower-priced securities to purchase as their replacement, and when prices get low enough, these same investors will repurchase the same security that they may have just sold at some earlier point in time. These actions are what keep the prices fairly accurate and fluid and make it much more difficult for people to find the next winners.

When I first started my MBA, I read a book, an early edition in 2004 by author Burton Malkiel, A Random Walk Down Wall Street, which, in the updated edition, did a study between 1970 and 2012. In this study, 358 mutual funds were examined over those 42 years, and the results are somewhat shocking. At the end of the 42 years, out of the 358 initial funds, 266 were no longer being traded. Then, out of the 92 surviving funds, the breakdown is as follows: 42 had returns within 1% of the market, 18 beat the market by 1%, and the remaining 32 were greater than 1% worse than the markets. The conclusion of the book is not to try to beat the markets and that they are fairly priced, to begin with.

So if you think it is easy to pick winners consistently, I hope you are starting to see that is not the case, and in reality, it is nearly impossible. A theory was developed on this, called the efficient market hypothesis, which we will examine in more detail later in the book. This hypothesis's basics are that stock prices are random in nature and will move up and down in a random manner. Since most investors want to make a fast or quick profit every day, this usually leads those same people to look for ways to help predict the next market move. Investors love patterns, and we look for them in our stock picks to gain an advantage in our dealings in the same markets. However, these patterns are not worth much as the market is a random collection of stocks that does what it does, regardless of patterns or trends people think they may have spotted. The very fact that the markets are unpredictable and random makes investors nervous, but that is the way the markets act regardless. None of this will help you beat the markets, and the only aspect of the markets that we can truly