What are stocks?
Stocks represent equity investments in a company. You become a partial owner of the company when you purchase stocks.
Investing in stocks
You can profit from investing in stocks when the stock price increases or when you receive quarterly dividends.
Why stock prices fluctuate
The stock market works like an auction. Buyers and sellers can be individuals, companies, or governments. The stock price decreases when there are more sellers than buyers. It rises when there are more buyers than sellers.
Market Capitalization
The market capitalization of a stock (or “market cap”) is the total number of outstanding shares multiplied by the stock price. For example, the market cap of a company would be $50 million if it has one million shares outstanding at a price of $50 per share.
Stock Splits
A stock split occurs when a company increases the total number of shares by dividing its existing shares. This is usually done at a ratio of one to two. For example, if you have 100 shares at $80 per share, you would have 200 shares at $40 per share in the case of a stock split. The number of shares changes, but the total value of your investment remains the same.
Value of a stock versus its price
There is no direct relationship between a stock’s price and its value. A stock priced at $50 may be more valuable than a stock priced at $800 based on price alone. The relationship between the price-to-earnings ratio and net assets determines whether a stock is undervalued or overvalued.
What are dividends?
Dividends are usually cash amounts that companies send to their shareholders. Investing in dividend-paying stocks refers to portfolios that contain stocks that issue regular dividends over the years. These stocks create a recurring source of passive income, which can be beneficial for you during retirement.
High-value stocks
These are established, well-known companies with a history of paying consistent dividends regardless of economic conditions.
Preferred stocks
Preferred stocks differ from the common stocks owned by most investors. Preferred stockholders always receive dividends first and will be the first shareholders to receive payments in the event of the company’s bankruptcy. However, the stock price does not fluctuate like common stock, so investors may miss some gains with fast-growing companies.
Finding stocks for your portfolio
Investment opportunities depend on multiple sources. You can rely on companies like Standard & Poor’s (S&P) or other online resources that might inform you about emerging companies if you wish to use professional research services. You can also look around your community and see what people are interested in purchasing if you do not find investment site reviews appealing.
How to buy stocks
You can buy stocks directly using a brokerage account or one of the many available investment apps. These platforms allow you to buy, sell, and store the stocks you purchase on your home computer or smartphone. The only differences among them are typically in fees and available resources.
Using your retirement account
You can also invest in stocks through your retirement account. Your employer may offer a standard retirement account, such as a 401(k) or 403(b), as part of your benefits package. These accounts invest your money for retirement, but your investment options are typically limited to the choices provided by your employer and plan provider.
Choosing a stockbroker
There are two types of stockbrokers: full-service and discount. Full-service brokers offer personalized recommendations and charge higher fees, service charges, and commissions. Most investors are willing
Source: https://www.thebalancemoney.com/the-complete-beginner-s-guide-to-investing-in-stock-358114
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