Stock Market Basics
What Is A Stock?
The first thing that any investor needs to know about stock market basics is exactly what a stock is. A stock is an ownership share in the underlying company, and owners of stock will normally receive dividends from the underlying company if the business is successful.
There are many types of stock, and this includes preferred shares, common shares, corporate stocks, growth stocks, IPO stocks, penny stocks, and many other types.
Blue-chip stocks are stocks from highly regarded and extensively successful companies, like Apple, PepsiCo, and Microsoft to name a few.
Stockholders share in the ups and downs of a company, receiving dividends when the company makes a profit and seeing lower share prices when the company has a bad period.
Investing in stocks can have various risks involved, and each stock may have a different risk level.
Learning the stock market basics means understanding how to assess the risks associated with a stock, and how to research the company behind the stock certificate.
Research may be difficult if the stock is a penny stock or the company is just starting out. Penny stocks trade for low prices, usually $5 or less per share.
Sub penny stocks trade at less than $1 per share. The penny stock market is considered a very high risk because it is much more volatile than the markets for other stocks.
Penny stocks are also more prone to stock scams and price manipulation because these stocks are not traded on the large exchanges.
When stocks are purchased then the investor actually has a priority claim on a fraction of the company profits and assets.
Stockholders do not get to make decisions concerning the day to day operations of the business but these investors do get to vote on important company decisions during shareholder meetings.
Understanding the stock market basics starts with understanding what a stock is and how this investment works.
The stock market can be risky, and every investor will have different strategies and varying acceptable risk levels.
Some stocks carry less risk than others, and the potential return may be different for every stock and underlying company.
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