What is stock?
Stocks are a type of investment that represents partial ownership in a company. Investors buy stocks that they think will increase in value over time. Stocks are investments. When you buy stock in a company, you are buying a small part of the company called stock.
Investors buy stock in a company they think will increase in value. When that happens, the company’s stock also rises. Those shares can be sold for profit.
The stock market consists of exchanges such as the New York Stock Exchange and the Nasdaq. Stock is listed on a specific exchange and acts as a market for that stock, connecting buyers and sellers. The exchange tracks the supply and demand of each stock and the price directly related to it.
Below are the 10 things to know about stock…
1. Buy Low, Sell High
Sounds simple, doesn’t it? However, investing is a rare part of our financial life where everything gets cheaper seems to be a bad thing. Few consumers bemoan cheaper pump prices amid the drop in oil prices over the past year and a half, but the moderate market decline is seen as the death knell for the bull market.
These are not mutually exclusive facts: the current bull market will end and most stocks have a long time horizon that is proven to be profitable investments and often move higher.
2. There Is No Such Thing As A Sure Thing
Oil prices at $ 100 a barrel are here for the long haul; Alibaba is a global rover that cannot be stopped; ESPN is immune to the quicksand of the cable business, and Disney’s ability to make money will never be in doubt. Only three sample scenarios that were once considered gospel have been filled with holes.
A wise word: Conventional wisdom is not always wrong, but it often has a terrible time. Some of the best long-term stock market investors – Warren Buffett, Carl Icahn, and their friends – have placed their biggest bets on companies that are unprofitable or under stress in the markets. While long-term equity returns have generally been a safe bet in the past, individual firms are inherently riskier.
Read More: Advantages and Disadvantages of Investing
3. Get Familiar With Filings
While some investors may think they have a sixth sense of finding good companies, the rest of us need to do our homework. There’s no better place to start than the regular reports of public companies to the SEC, which are required to detail everything from company finances to potential conflicts and factors. risk. The annual
10K covers the most information, from quarterly and annual financial figures to line of business descriptions and management comments on growth opportunities and costs. The regulatory documents will also detail all changes in management, acquisitions, and stock market transactions by officers or members of the board of directors.
All filings for U.S. public companies and foreign companies listed in the United States can be viewed online through the SEC’s EDGAR system.
4. Long-Term Matters
Taxes aren’t the only reason short-term trading is a losing game for most investors. Trying to buy or sell stocks based on quarterly earnings reports or economic data points is a game for automated trading platforms, not for ordinary Joe.
Better opportunities arise when a stock or sector is rejected by the market and weakens despite a stable economic performance that will generate a long stream of profits. Transportation stocks like airlines and railroads have experienced limited long periods of time, reaping substantial returns only when economic conditions and industry dynamics match.
Years of mismanagement in the airline industry led to a series of bankruptcies in the 2000s, but the resulting wave of mergers made American Airlines, United Continental and Delta Air Lines more competitive and available, ready to benefit from trends such as lower fuel costs.
5. Dividends
Apple’s share price fell from $ 110.38 to $ 105.26 in 2015. This is an 11-year drop, but investors who held the shares during the year lost only 3%. Why? Because Apple paid a dividend of $ 2.03 during the year. 4,444 dividend stocks are not immune to the crash, but they provide a degree of isolation that no one else has. But there’s a word of warning: lucrative dividends that seem too good to last often aren’t. Ask the owner of Kinder Morgan, the company cut its quarterly spending by 75% in December. Shark Tank investor Kevin O’Leary likes a statistic that shows that most of the S&P 500’s returns over the years come from dividends rather than price appreciation. That is why he said that he will never own shares that do not pay at least part of the profits to shareholders. (See “Why Kevin O’Leary Likes Dividends”).
6. No Perfect Metric
Professional and amateur investors have their favorite measures of growth and value, from price-earnings ratios to dividend yields and profit margins. But there is no single number that can distinguish good actions from bad. A stock that looks cheap with a 10x P / E can go 5x in an instant, while a new technology that looks expensive with a 3x P / E can easily go 6x in an instant.
7. A $5 Stock Isn’t Expensive And A $100 Stock Is cheap
The price of a stock is not an appropriate number to judge in deciding whether a stock is a good buy. While the three-digit price tag may be too expensive for a new investor with limited funds, loading 100 shares for $1 is not necessarily a better strategy. Think of investing like going to the grocery store, having a reason to go to the store with a list instead of just deciding what to buy based on price tags.
8. Taxes Can Affect Your Profits
FANG Stocks – Facebook, Amazon.com, Netflix, and Google (Alphabet) have performed well in 2015, with returns ranging from 34% to 134%, but from a tax point of view, any investor has bought. ‘last year and consider releasing want them. to continue climbing. This is because the one-year mark is the dividing line for taxpayers.
The sale of shares held for less than one year creates short-term capital value, which is taxed as ordinary income. That could mean Uncle Sam will refund 25% down to 39.6%.
9. Understanding What You Need and What You Are Paying For
The evolving intermediary industry has a honeycomb of competition to offer the latest and greatest deals, but the basic prerequisites for most investors can be found anywhere.
Make sure you know the type of buy/sell order you enter. For example, market orders are executed as soon as possible, regardless of the market price. Stop orders complete trading only within the parameters of the set price.
10. Catch The Market Newsletter With a Whole Jar of Salt
The first trading day of 2016 has no shortage of headlines, from the collapse of the Chinese stock market to GM’s investment in rival Uber Lyft and the severing of Saudi-Iranian ties. But is that why US stocks are down more than 2.5% (as they were before bouncing off lows)?
As an investor, news that drives the daily market swings should be seen as interesting reading rather than a reason to implement or change strategy.
