| Investing in stocks can be a good thing. But you | | | | that common stocks have an average annual return |
| need to understand the stock market before you | | | | of about 14% since the end of World War II. |
| invest your valuable cash. The stock market works | | | | Although there have been years when the market |
| much like an auction. It is an auction-based market, | | | | dropped 20% or more. These drops are hard to |
| with a stockbroker acting as an intermediary who | | | | handle, but you must realize that the market has |
| matches buyers and sellers of stocks. The price of a | | | | recovered each time and has gone on to reap even |
| stock is determined by how much he buyer is willing | | | | greater returns in time. |
| to pay and how little the seller is willing to sell for. | | | | Most financial advisors will warn you that you should |
| The prices you see on the Internet or in your local | | | | not invest a lot in the stock market if you need cash |
| newspaper are from the last trades of the prior day. | | | | back in less than five years. But, investing a little is |
| These vehicles also tell you what the best prices are | | | | okay. An advantage of long-term investing is saving |
| that buyers will pay for a share, as well as the best | | | | on taxes. If you hang on to your stocks, or sell at a |
| price a seller will take. The stock's prices are | | | | higher price than you paid, you must pay capital gains |
| constantly changing - going up and down by as little | | | | on the profit. It you own a stock for less than a |
| as pennies or as much as a few dollars. | | | | year, your short-term capital gain tax rate is the |
| The good news is common stocks have | | | | same as your federal tax bracket. |
| outperformed nearly all other assets. Statistics show | | | | |