Posts Tagged ‘Investor’

5 Key Stock Market Basics for Beginner Investors

Monday, March 26th, 2012

Read these tips to increase your knowledge of stock market basics.

1/ What is Stock?

Simply put, ‘stock’ means to own a part of a company for personal profit and growth. Since you buy stock and therefore “invest” in a company, you also get to reap the benefits of earning a part of the company’s profits.

2/ The Stock Market Defined

The stock market is a market where stocks are traded. Just like the super market is a place to buy and sell groceries, a stock market is a place to buy and sell stock.

3/ What is a Stock Exchange?

A stock market is also called a stock exchange. You may have heard of the New York Stock Exchange (NYSE), the London Stock Exchange (LSE) or even the Honk Kong Stock Exchange (Hang Sang). So stock exchanges are international places where a company’s stock may be traded. They can be physical buildings but they can also be electronic exchanges, such as the NASDAQ, which is an online stock exchange.
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4/ What Types of Stocks are traded on the Stock Exchange?

There are basically two types of stock: common stock and preferred stock. Common stock, by definition is more common and it denotes variable dividend payouts and one vote per share to help determine a company’s managerial decisions. Preferred stock denotes fixed payout (called dividends) over the length that stock is held and may not have the same voting rights. Common stock is generally considered riskier because dividend payouts are dependent on the company making a profit. If the company goes bankrupt, common stockholders are amongst the last to be paid, if at all.

5/ Why Do Stock Prices Go Up And Down?

Stock market basics tell us that stock prices fluctuate because at any given time, some people might be selling large quantities of stock (driving demand and prices down) while others might be buying stock (driving demand and prices up).