A Guide to the Virtual Stock Market

The virtual stock marketFor those who don’t own any stock in any company the stock market is like a foreign country where you neither speak the language nor understand their customs.  Yet, this place that most people have such little understanding of seems to have a huge influence over the lives of most people in this country. The stock market and what happens there determines to a great extent whether we are in a recession or economic growth.  You know that fortunes can be made on the stock market in a blink of an eye and that smart investors in stocks can grow a nice nest egg for the future.  Perhaps, you’ve considered investing in the market but, have been too afraid that your lack of knowledge would lead you to bad choices. 

There is a way, that anyone can learn firsthand about how the stock market works and that is by using the Virtual Stock Exchange.  A virtual stock exchange is a stock market simulator that allows you to buy and sell stocks all without risking a single penny.  It is actually a free online game with a very serious purpose to help you gain and understand just how the stock market works and how money is made and lost in the market. 

Virtual stock markets allow you to buy and sell stocks of various companies, build a stock portfolio, and then watch your profits grow or shrink as the case may be.  By actually making decisions about stocks you learn which are high yield stocks and which are not.  You learn how to follow the stock markets trends and how they affect investors in the market. 

A virtual stock exchange allows you to not only learn by doing but, gives you the opportunity to learn from your mistakes without losing any actual money. Originally designed to help students understand the market and market trends and have some experience in managing stock portfolios this stock market simulator is now available to anyone who wants to learn more about the stock market. 

Whether you are thinking about investing and want a better understanding of how the market works and what stocks are good stocks to buy and which ones to avoid or whether you simply want to learn firsthand how the stock market affects  your life and the country’s economy a stock market game is a great place to start.

 Getting started is easy and not only do you have the opportunity to learn about the stock market first hand but, you can communicate with other virtual stock market members and discuss stocks, portfolios, and learn from one another. This will aid you even more in understanding the market. 

You can start by choosing just one or two stocks and watching how they do, studying the trends and deciding which shares to buy and how many for select companies.  You can either simply enjoy the virtual stock market as a fun and interesting game, or you can use it to seriously learn which stocks may be good to invest in.  Either way you will be amazed at how much you can learn about the real stock market from investing a little time but, no money in this stock market simulator.


A Guide To Common Stocks Versus Preferred Stocks

Is Preferred Stock Better Than Common Stock?Stocks can be categorized into a number of different groups; the two most important categories however are preferred stock and common stock. This article will discuss the fundamental differences of common stocks vs. preferred stocks and the rights that these designations give to the stock owners.

The first major difference between the two types of stock is that preferred stock holders have a larger claim to the company earnings and assets. There are two instances when this difference is very clear: when the company posts dividends and when the company dissolves and liquidates its assets.

About Dividends

When a company pays dividends, preferred stockholders must be paid first; holders of common stock must stand in line. Preferred stocks usually have dividends paid at regular intervals. This also means that if a dividend is not paid due to lower earnings, it must usually be paid before either stock group can receive further dividends later.

Dividends paid to common stockholders are not usually on a set schedule and must be voted on by the board of directors. These dividends are usually much lower and sporadic than dividends paid to preferred stockholders.

Asset Allocation

The term “preferred” is essentially in reference to the preferred shareholders’ rights to company assets should the company liquidate for any reason. In the event of company insolvency, the company will pay creditors and bondholders first, preferred stockholders next and common stockholders last. In cases where a company does not have enough assets to pay off all shareholders, the preferred shareholders will be paid first and the common shareholders could actually receive nothing if there is not enough left over.

Voting Rights

The second major difference is in the number of votes a shareholder has when electing board members or when issuing stock shares and splits. Common stocks give the shareholder voting rights, whereas preferred stockholders usually do not have the right to vote. Usually there is one vote per share of common stock. This means that shareholders with multiple shares of common stock will have multiple votes in direct relation to the amount of stock they hold. However, many companies have a tiered system that allocates differing amounts of votes per share for differing levels of common stock.

Conclusion

When comparing common stocks vs preferred stocks it is important to also look at how each specific company allocates dividends and voting rights to their shareholders. In general, preferred stocks have set dividends, preference in asset allocation, and do not carry votes. Common stocks are last in line for asset allocation, may or may not receive sporadic dividends, and carry voting rights.

The choice between the two stock options will be heavily influenced by the investment style of the potential stockholder. The more conservative investor who wants to protect the investment as much as possible will likely feel more comfortable with preferred stocks. Common stocks are not guaranteed dividends or return of capital in the event the company liquidates.


The Stock Market Game – Video

Stock Market Game VideoIn this post we are featuring a ten minute video that walks you through a sample stock market game and shows you just how simple it is to use. Jamie Akien goes into detail in this demonstration and shows actual visuals from the virtual stock exchange right on screen so you can see exactly how it works. A stock market simulator is the perfect way to get associated to trading stocks in general, whether you’re a new investor in the markets, or a student looking for more information.

Sit back, relax and enjoy!


A Guide for Stock Market Games

Money BullseyeStock market games or simulators are great ways to learn about investing money wisely and building a portfolio. They can be a great aids to adults who are looking to invest their money in the market as well as for students who are learning core academic concepts which they can apply to this and other money management areas of their lives. Its a great way to prepare for the future. There are many versions of stock market simulators available, and amongst some of the most user friendly are SmartStocks.com’s Stock Market Game and Wall Street Survivor.

How Exactly Do Stock Simulators Work?

The stock market game enables users to build a portfolio using virtual cash. The goal is to have a profitable portfolio using live trading simulations. Actual news updates and internet research is used, making stock market games a realistic representation of the real time market. Users research actual stocks and make evaluations, based on their research, in order to ascertain what the most profitable options will be. Stocks are traded from the NYSE, Nasdaq and AMEX exchanges, helping users determine the why and how of stock performance in the market. The stock market game also provides a good understanding of how the economy works and will prepare users for trading in the market, as well as granting them money management skills for other aspects of finance. For students, this also develops valuable life skills such as critical thinking, decision-making, saving and investing money, and performing unassisted research.

User Friendly Stock Market Games

SmartStocks.com’s Stock Market Game is a real time stock exchange that enables players to learn about online trading and investing without the risk of real investments. Players receive $1 million of virtual money to invest in any way they choose. At the end of each day, rankings are calculated for all players. These rankings are based upon the increase or decrease in value of the user’s portfolio from the start of the current month. With no limit to the number of students or classes that can sign up, this particular stock market simulator is a great tool for teachers. They even have sample portfolios and a ticker look up to help players learn to identify the different ticker symbols of stocks.

Another great user friendly stock market simulator available on the web is Wall Street Survivor. This simulator is completely free and is aimed at people who wish to learn what goes on behind the scenes in the trading industry. This will help prepare them for exchanging in the real market. Aside from the virtual stock exchange, they offer an extensive amount of information to help educate users. The game is valuable itself, but the Wall Street Survivor also offers real cash prize contests to it’s players. Both individuals and teacher’s with groups are invited to participate in this market simulator.

So in conclusion, stock market games (also known as market simulators or virtual trading) are great tools for those looking to get into the market as they help people learn the skills necessary for smart investing. They offer valuable research, financial information, and the opportunity to learn many life skills required for a successful financial future.


Advantages of Preferred Stock Video

Preferred Stock Advantages VideoThe debate of common stock vs preferred stock has been raging since the markets first opened years ago. Should new investors consider investing in common or preferred stock? Which one will offer the greatest returns with the least amount of risk? These are questions that are asked every day, and the answers are not always easily found.

The video in this segment details some important information on why investors may want to consider and pursue preferred stock for their financial investments. Some of the advantages of preferred stock mentioned in the segment are:

  • Higher payouts on dividends
  • Better price stability
  • Smaller investment amounts
  • Similar to bonds, but more liquid

As always, it’s important to consult with a financial advisor if you are new to market investing and are considering purchasing either common or preferred stock. As well, you may want to consider practicing your trading techniques with a virtual stock exchange before investing any real money. Enjoy the video!


What is the Stock Market?

understanding the stock marketThis article answers the age old question: what is the stock market? Simply speaking, a stock market or stock exchange is a central place for buying and selling stocks, bonds and other securities; much as a fruit market is a central place for buying and selling fruit. There are stock exchanges all over the world located in large cities. In the U.S. there are three major stock exchanges; the New York Stock Exchange (NYSE), the American Stock Exchange (AMEX) now part of the NYSE group, and the National Association of Securities Dealers (NASDAQ). Although the New York Stock Exchange is still there as a vehicle to allow exchanges of securities, it has become a publicly traded corporation itself. Most exchanges exist so that investors may buy and sell stock through its exchange. The NYSE now sells one-year licenses to investors who wish to trade directly with the exchange but most individual investors work through a broker or investment company.

How a Company Gets Listed on the Stock Market

To understand how the market works, you must understand how a business obtains financing. There are two ways a corporation can be financed; obtaining a loan, or selling shares of the company to other investors. Shares in a company are called stock. Before a company can list their stock on any exchange, they must go public with the stock. When a company meets certain criteria, that company can go public with its shares and thereby have a wider market for its stock. At that point, the company is given a stock symbol and the price to buy or sell the stock appears either online or in the newspaper and is listed for the public to view. This means that the public can share ownership in the company by buying shares in that company. Be aware that the price to buy a share varies from what a seller wishes to sell it for and the exchange must be negotiated.

Decimalization and Stock Splits

In 2001 stocks ceased to be traded in 1/16 of a share and trading was decimalized. Fractional shares are now listed by .01-.99. Fractional shares may occur when a company declares a stock split. If a company declares a 3 for 2 split, a person owning 73 shares will now own 109.5 shares. Often companies will pay cash for the fractional share.

How an Investor Trades in Company Stock

If an investor becomes interested in a company listed on an exchange and wishes to buy stock in that company, the investor contacts a broker with an order to buy. In order to complete a buy order, there must be a seller willing to sell the number of shares requested. The broker then issues that buy order to the necessary exchange. When the exchange is able to fill that buy order, the broker is notified and money goes from the buyer to the seller. In this way, ownership in that company passes from the seller to the buyer in proportion to the number of shares exchanged.

Common Stock vs Preferred Stock

There is a difference between common stock and preferred stock. Preferred stock has first claim to dividends ahead of common stock. Most preferred shares have no voting rights. In a decision between common stock vs preferred stock, an investor must weigh, in some cases, the fixed dividend offered by the preferred stock and the possibility of higher dividends to be distributed to common stock shareholders. Investors holding shares of preferred stock will have more rights to assets if the company is liquidated and will be paid ahead of investors holding common shares of stock. Bonds have rights ahead of preferred stock shares.

Please feel free to comment on what is the stock market, as this helps spread the information in order to educate more people looking to invest in stocks.


Understanding Common Stocks

Common Stock QuestionsOne of the most common investment choices that people have in the marketplace is equities, or stocks as they are more typically referred to.  At its simplest form, buying a common stock is buying a partial ownership in a company.  Companies develop over time, from an idea in a garage, to one backed by venture capital and private investors, to a big-time company which is publicly traded on a stock exchange.

Investors who own the common stock of a business are the owners of that business.  Most public companies have thousands of people who own their stock, so every share represents only a tiny portion of the ownership.  However, just like private businesses, owners of public companies are entitled to their share of the profits from that business.

Because there are many owners of the company, it is impossible for all of them to get together and make decisions on how to run the business.  Because of this, every public company has a board of directors which has been hired by the shareholders to look out for their best interests.

Shareholders of public companies vote for a board by casting a ballot called a proxy.  A vote is held every year, although in some cases the term of a director lasts more than one year.

The Various Roles Within A Publicly Traded Company

The chief responsibility of the board is the hiring and overseeing a management team, usually a Chief Executive Officer (CEO) and a Chief Financial Officer (CFO).  Sometimes these roles can overlap as the CEO or CFO may also sit on the board of directors.  The management team is responsible for the day-to-day operations of the firm.  Generally, the CEO makes strategic decisions about what the company will do, while the CFO keeps track of the money spent and earned.

As companies make products, sell them and earn money, they create profit.  Some companies will use those profits to reinvest in the business and grow profits further in the future.  Other companies will not have the same growth prospects and will start giving those profits to their shareholders in the form of dividends.  Voting to issue a dividend is done by the board of directors.

Dividends

A common stock that pays a dividend sends the shareholder a check periodically, usually quarterly.  Dollar amounts can vary over time, although most companies are loathe to reduce dividends because they feel it sends a negative signal to the marketplace about the future prospects of their firm.

Dividends are an important consideration in how much an investor is willing to pay for a common stock on a stock exchange.  There are a few theoretical constructs regarding how to value a stock.  At the most basic level, a stock is worth today what the amount of its future dividend payments will be, with a haircut to that value for how far off in the future those payments will be made.  All else equal, a stock that pays a dividend today should be worth more than one that will not pay a dividend for several years.

While valuing a common stock based on its future dividends may be a sound theoretical way to decide on the value of a business, few investors go through this exercise.  Stocks that trade on a stock exchange have quotes updated constantly through the trading day, during which the value of the business is always being reevaluated.

Stock Economics 101

Depending on various events, a stock will be worth more or less one day versus the previous day.  Common events that make stocks more are news about the company’s profits, products or management teams.  Stocks also respond to bigger trends within the economy, appreciating or depreciating depending on what sort of policy actions politicians take, the effect of interest rates or the general state of the economy.

Over short periods of time, a common stock can be very volatile as investors try to weigh its merits.  Over longer periods of time, stocks tend to appreciate and depreciate based on their profits, while everything else tends to be noise.  A company that earns more money will be worth more.  Companies that continually grow their earnings will also generally see their stocks rise in value.

In simple economics, the price of a stock is determined by supply and demand.  As demand for the stock rises so does the price.  Demand for a given stock tends to rise as good news comes out and falls as bad news is learned by the markets.

Supply can also affect the price of a stock.  Many initial public offerings are successful, which means the stock appreciates on its first day of trading, because only a portion of the company was sold.  There is not enough supply to meet the demand, so the price rises.  Alternatively, some companies will issue more shares later on to raise money to invest in a new project.  Generally when this happens the stock trades lower because the supply of shares has increased without a commiserate increase in demand.

Most stocks are traded on a stock exchange, a place where institutional brokers gather to transact on behalf of their clients.  Historically, this was a physical place with human brokers yelling to one another and flashing hand signals indicating that they wanted to buy or sell a position at a given price.  Today, these physical exchanges still exist but are being slowly replaced by electronic markets.

An electronic stock exchange accomplishes the same function as a physical one but with greater efficiency.  Without the people trying to scream at one another, transactions happen quicker.  Because there is lower overhead to running an electronic exchange, the costs of buying or selling a stock are lower.

Costs Of Owning A Stock

There are a few different costs associated with buying a stock.  First is the commission, which is the most explicit cost.  This is the dollar amount that a broker charges a client to execute a trade.  Depending on the size of the order, this can either be a fixed dollar amount or an amount per share.

Another cost is known as the bid-ask spread.  Typically, brokers are willing to buy shares at a price that is slightly lower than that which they are willing to sell the same shares.  An investor who purchases shares at the ask price will instantly lose money because those same shares would be sold back at the bid price, which by definition is lower.

Conclusion

Lastly, there is a cost to impacting the market.  As demand for a stock increases, its price rises.  Each investor who tries to buy a stock puts incremental upward pressure on its price, while each incremental seller puts downward pressure on a price.  This cost is negligible for small trades but can be sizable for institutional investors who transact millions of dollars with each buy and sell decision.

Because of the invention of the electronic stock exchange, all of these costs have come down substantially, making it much easier and cheaper for investors to buy stocks.

Stocks can trade on multiple exchanges, sometimes in completely different countries.  Another advantage that an electronic exchange has is that it can search for shares on multiple exchanges, rather than just trying to find a buyer and seller in a narrow space.  This increases the speed at which orders of common stock can be filled.


Can A Virtual Stock Exchange Make You Money?

virtual stock exchange

Virtual stock exchange

A virtual stock exchange is a simulated stock market game – usually available free of charge – that allows players to test their investment strategies without using real money. The term virtual refers to the fact that the game is played online either privately or publicly.The online trading game is designed to simulate the actual markets as closely as possible, but without any risk to the players. Generally, using a virtual stock exchange requires first completing a registration form for membership. Each member has their own portfolio with which they can compete with other players.

Real time virtual stock exchange

Many games actually use real time quotes from actual stock markets like Nasdaq. The players make trades based on the same news, events and data that the real Wall Street investors are using. Virtual Stock Exchange from MarketWatch, featured on The Wall Street Journal Digital Network, is an example of a real time online stock trading game.The MarketWatch setup provides players with research on the New York Stock Exchange (NYSE), Nasdaq and AMEX. For example, players can check 52 week highs and lows, most active stocks, and stocks with the highest percentage price gains and losses.

Players on the MarketWatch game can also use the Industry Analyzer tool that allows them to check performance of specific industries like gold mining or health care. In addition, they can analyze the latest ratings upgrades and downgrades for specific companies.

Independent research

In addition to using the research tools provided by the game itself, players can utilize other research sources when playing real time games. All the action in the game happens just as it does in the “real world” stock market except play money is used instead of the real thing.

As with investing in the real world stock market, achieving success in virtual trading requires diligent research, staying updated on the latest news and developing a working system. However, because of the game aspect of the trading, many players may prefer short term types of trading like day trading and swing trading as opposed to longer term strategies.

Many online trading games include discussion boards that allow the players to interact with each other and exchange ideas. Sometimes these forums are the best places to learn actual winning techniques for stock investing.

Practicing for the real thing with Virtual Stock Exchanges

Many players of virtual stock trading games are not simply there to have fun. They use the online game to practice for actual equity investing. For this type of training, the real time games are definitely the best.

Other games with real time quotes include How the Market Works! (http://www.howthemarketworks.com), Wall Street Survivor (http://www.wallstreetsurvivor.com) and StockTrak (http://www.stocktrak.com).

Note that not all online stock market games use highly realistic trading procedures. In order to practice for the real stock market, you should select a platform that mimics the actual market as much as possible.

Since nearly all the games are free of charge and do not require money for investing, you can play without risk and test different types of investing strategies. In this way, you can really know what you’re doing when you decide it’s time to invest on Wall Street.

Many people become discouraged early on in stock trading because they find that making money is much harder than it may seem after reading about some overnight success stories. Before they know it, they have lost all the money that they had allotted to stock investing. By using a realistic virtual stock exchange with real time quotes, they can ensure they understand trading principles before investing.

Common stock

A security used in stock exchange trading that provides a share of ownership in a corporation is known as common stock. Holders of common stock possess voting rights and a share of the company’s growth through capital appreciation and/or dividends.

Common stock differs from preferred stock in that the latter are given priority in case of bankruptcy. If the corporation goes bankrupt, the preferred stock holders, bond holders, creditors and other investors are paid first form available funds before the common stock holder.

While this entails a greater risk, the common shareholder generally experiences better investment performance over time than holders of preferred shares or bonds. Most investors in stock exchange trading hold common rather than preferred shares.

Stock exchange trading with common shares

When an investor buys common stock they generally will receive one vote per share toward the election of the company’s board of directors. The directors are the individuals who actually run the company for the owners. Note though that the total votes is not always directly proportional to the actual ownership in shares.

In addition to their board of directors voting rights, common shareholders will also typically be able to vote on other important company actions governing policy, strategy, objectives, stock splits and the like. Voting rights can be particularly important for investors who buy large numbers of shares in a company with the idea of holding them for long periods.

Common shareholders also possess what are known as preemptive rights that allow them to keep their proportional ownership in the company even in the case that a new stock offering is made. What this generally means is that new stock offering is made with preferred stock and/or other investments, while the common shareholder maintains their proportional ownership.

Making money with common stock

Stock exchange trading generally involves choosing stocks that you believe will appreciate in value by the time you wish to sell the stock. Again, if the company whose shares you own is successful, you can earn money by appreciation and/or dividends depending of the specific type of share involved.

Investors master stock exchange trading by learning different techniques in predicting the direction of companies or the market in general. Many traders, for example, will study the financial details of a company to determine whether it is likely to be successful or not. They invest based on this individual analysis of each company.

Other investors choose to invest more broadly in specific industries or indices. They may study technical details and graphs that indicate the mass behavior of investors. If they see a trend in this mass behavior, they will try to take advantage of it by “riding the wave” so to speak.

Investors can also be categorized based on the length of time that they take between trades. Short term investors tend to be higher risk investors than those who are in for longer periods. A day trader, for example, attempts to make gains on trades that are completed between the opening and closing bell each day. Swing traders will analyze and invest in longer but still relatively short market trends.

Mastering stock investment can be challenging because of the research and knowledge required. Short term investment also requires significant time due to the number of buying and selling decisions that are required.

The average investor looking to save money for retirement will most likely avail of a financial adviser who recommends safe longer term investments. If, instead, you prefer to invest on your own, one way to master stock exchange trading without risk is to practice using realistic virtual stock market games or a virtual stock exchange.