There's no doubt that investing in the stock market can be one of the most exciting ways of making money. Nothing quite compares with the thrill of seeing the little-known stock you picked become a hot property, perhaps doubling in price—and then doubling again and again. But as with any investment, the potential risks are equal to the rewards, so investors who want to play the market owe it to themselves to become fully informed before getting involved.

How Does the Stock Market Work?

A share of stock represents a unit of ownership in a corporation. When you buy stock, you are be coming a part owner of the business. Therefore, you benefit from any increase in the value of the corporation and you suffer when the corporation performs badly. You're also entitled to share in the profits earned by the corporation.

Stocks are bought and sold...