Stocks Basics

Here is a summary of stock market basics:

1. Stock=Ownership. As a stock owner, you thus have a claim on the earnings and assets of a specific company. With this also comes voting rights on your shares.

2. Bonds are debt while stock is equity. Bondholders have a higher claim than stockholders as they are guaranteed a return on their trades. Stocks are considered riskier than investments as they produce a higher return rate.

3. With stocks, there is the possibility that you could lose your entire investment,. However, the positive is that if you invest in the right company you could make a great deal of money.

4. Common stocks and preferred stocks are the two main types of stocks. Companies also have the ability to create different stock classes.

5. The places where sellers and buyers meet to invest and trade stocks are called stock markets. The most popular stock markets in the United States are NYSE and Nasdaq.

6. Supply and demand cause stock prices to fluctuate. Also there are many other factors that can influence prices of which the most important is earnings.

7. There is no consensus or theory as to why stock prices continue to fluctuate on a general or day-to-day basis.

8. You can either purchase stocks via a brokerage firm or a DRIP (Dividend Reinvestment Plan).

9. Once you know what everything means, you will find that stock tables and quotes are not all that overwhelming to interpret.

10. Remember to use your head when investing in the stock market, don’t be overly cautious, but do not make rash, impulsive decisions. As the saying goes: “Bulls make money, bears make money, but pigs get slaughtered!”