Introduction to Investing

Did you know that investing has been around for over 200 years? In 1792, twenty-four men entered a room and signed a paper that said they would sell parts of companies among themselves and others. The parts of the companies were sold in the form of stocks. This marked the beginning of the stock market.

Although times have changed greatly in the last 200 years, the ideas of investing have basically remained the same. People still buy and sell stocks, bonds, and mutual funds.Have you ever really wondered exactly how buying and selling stocks works? Ok, let's say that you have this feeling that McDonalds is going to go up soon. You, the young investor, remember that you have $350 that you have saved from Christmas presents, birthday presents, gifts, allowances, and whatever else you may have gotten the money from. You decide to invest in McDonalds so you would go to a person called a broker and tell them to buy stock in McDonalds. "Sure, I'll buy $325 worth of McDonalds and keep $25 for my commission," says the broker. Congratulations, you have just bought some stock!

But what happens to the money I gave the broker? That's a good question. Well, after the broker takes your money, he puts in an order on his computer that is sent to the stock exchange. The order was given to a person called a floor broker. This person sees the order and runs to the area of the stock exchange where McDonalds stock is being bought and sold. He finds someone who is selling stock in McDonalds and buys the stock from that person. He then rushes back to one of the many computers and reports the trade. The report goes back to the broker and you are given ownership of the stock.