What is stock?Stock is essentially a share in the ownership of a company. Stock also represents a claim on the company's assets and earnings. When a company requires extra capital in order to spur business growth, they can sell some, or all of the ownership of the company in the form of stocks. So for example, if you were to buy 100% of a company's stock, you would then become the outright owner of the company. The more stock you acquire will generally lead to an increase in the amount of decision-making power you have, within the company.
What is a share?A share is a unit of ownership in a company or financial asset. Owning shares in a company does not necessarily mean that the shareholder has any control over the day-to-day operations, however being a shareholder does entitle the possessor to an equal distribution of profits generated by the business. The two main types of shares are common shares and preferred shares.
What determines a stock's price?There are many factors that need to be taken into consideration, in order to determine a stock's price. Generally the price is dictated by an investors' perception the stocks intrinsic value.
There are a number of additional factors, which include:
- The size, sector and revenue streams of the company
- Recent company news
- The current economic climate
- Whether there is a bull or bear market
- World events, whether good or bad
What is a bull market?A bull market occurs when stock prices are increasing at a rate, faster than their historical averages.
What is a bear market?A bear market occurs when stock prices decrease at a rate, faster than their historical averages.
What is a market crash?The market has "crashed" when stock prices decrease dramatically over a short period of time.
What is insider trading?Insider trading occurs when an employee or shareholder, trades the company's stock. This is legal and acceptable, as long as the person is not trading, based upon non-public company information.
What is the Bid price? What is the Ask price?When requesting a stock quote, you'll receive the bid price and ask price. The bid price equates to the highest price you are likely to when selling the stock. The ask price equates to the lowest price you are likely to receive when purchasing the stock.
Please note, you are not guaranteed these prices, due to market fluctuation which causes the market prices to change constantly.
What is day trading?Day trading involves buying and selling the same stock during a 24 hour period, with many professional day traders commonly trading many times per day.
What are the main ways to make money with stocks?- Buy Low, Sell High (long trading)
- Sell High, Buy Low (short selling)
- Options trading
What is a dividend?A dividend refers to money that is given back to a shareholder, when the company they own shares in, has generated extra profit. In some cases companies decide to use these profits to help grow their business and do not distribute dividends.
What is the P.E. ratio?The Price to Earnings ratio is the current price of a company's stock divided by its Earnings Per Share. The P.E. ratio is generally used as an indicator of whether a stock is overpriced, underpriced, or on par.
What is an IPO?An IPO (Initial Public Offering) is when a company issues stock to the general public for the first time. The company also has an option to issue more stock in the future, which is called a Secondary IPO.
What is Dollar Cost Averaging?Dollar Cost Averaging involves buying the same dollar amount of a stock each month, which allows the buyer to acquire more shares when the stock's price is low and fewer shares when it is high.
What is a penny stock?A penny stock is a security with a value of less than $1 (or $5 in some cases) per share.
What is a small-cap stock? Mid-cap? Large-cap?These terms refer to a company's market capitalization, which equates to the number of outstanding shares times the stock's trading price.
Small cap: $250 Million to $2 Billion +/-
Mid cap: $2 Billion to $10 Billion +/-
Large cap: $10 Billion +