Today's Stock Market 101 tip is the various ways you can buy stock. At this point, we probably aren't ready to be purchasing stocks just yet, but it is important to understand where you can buy stocks. You have a couple options when it comes to buying stocks.
Your first option to buy stocks is a discount broker. Discount brokers offer very little advice for you. They are a basic medium to allow you to buy and sell stocks. Trading stocks with a discount broker is generally fairly cheap.
If you're looking for more support a full-service broker might be for you. They offer a lot more help and will make suggestions for you. However, they are much more expensive and will usually charge a lot more to make trades.
Online brokers have also become extremely popular. Online brokers can still be broken up into discount and full-service however. Online brokers tend to be the cheapest option for buying stocks. The majority of online brokers are discount brokers, but there are full-service online brokers as well.
Wednesday, June 17, 2009
What Influences Stock Prices?
Welcome to another Stock Market 101 lesson. Today I'll be discussing what causes stock prices to raise and fall.
Stock prices, in their simplest form, are a result of the basic principles of supply and demand. If a lot of people want to purchase a stock, the stock increases in value. Conversely, if many people are trying to sell a stock, its value will decrease. What causes the shift in supply and demand can be practically anything.
The amount of stocks available is something that will obviously change the value of a stock. If two companies who have similar worth both release stocks, but one releases 10,000 and the other releases 100,000, the former will likely have more expensive stocks.
The most common factor is profits and earnings. If a company is making a lot of money, it's fair to assume its stock will be valuable. If a company releases its earnings and they are much higher than expected, that stock will likely jump in price. On the flip side, if a company releases lower earnings than expected, the stock will probably fall in price. Earnings, however, are not the only factor.
Potential and growth can be a large factor in the price of a stock. If a company isn't making a ton of money yet, but it's viewed as "up and coming", its stock can be much higher than its earnings would indicate.
Bad news, or perceived bad news, can have a negative effect. If a company is rumored to be having problems, it can hurt the price of the stock. Sometimes these issues are real and the problems really do exist. Sometimes the problems are nothing more than rumors. Real or not though, bad news tends to hurt a stock's price. Then again, savvy buyers often can spot when the bad news isn't likely to actually hurt the company, snatch up the stock when it temporarily drops, and reap the benefits when its price rebounds.
Other factors can come into play, but most often stock prices are a reflection of supply, demand, earnings, potential, and good/bad news.
Stock prices, in their simplest form, are a result of the basic principles of supply and demand. If a lot of people want to purchase a stock, the stock increases in value. Conversely, if many people are trying to sell a stock, its value will decrease. What causes the shift in supply and demand can be practically anything.
The amount of stocks available is something that will obviously change the value of a stock. If two companies who have similar worth both release stocks, but one releases 10,000 and the other releases 100,000, the former will likely have more expensive stocks.
The most common factor is profits and earnings. If a company is making a lot of money, it's fair to assume its stock will be valuable. If a company releases its earnings and they are much higher than expected, that stock will likely jump in price. On the flip side, if a company releases lower earnings than expected, the stock will probably fall in price. Earnings, however, are not the only factor.
Potential and growth can be a large factor in the price of a stock. If a company isn't making a ton of money yet, but it's viewed as "up and coming", its stock can be much higher than its earnings would indicate.
Bad news, or perceived bad news, can have a negative effect. If a company is rumored to be having problems, it can hurt the price of the stock. Sometimes these issues are real and the problems really do exist. Sometimes the problems are nothing more than rumors. Real or not though, bad news tends to hurt a stock's price. Then again, savvy buyers often can spot when the bad news isn't likely to actually hurt the company, snatch up the stock when it temporarily drops, and reap the benefits when its price rebounds.
Other factors can come into play, but most often stock prices are a reflection of supply, demand, earnings, potential, and good/bad news.
Tuesday, June 16, 2009
Types of Stocks
Welcome to the second post of Stock Market 101. Today I've been researching the various types of stocks. The stock market really contains two types of stocks: preferred and common.
Preferred stocks tend to offer a fixed dividend rate. Dividends are profits that the company spreads amongst its shareholders. If a company goes bankrupt, preferred stockholders have their claims come before common stock. Companies often have the option to reclaim their preferred stocks. Meaning, at any time, they could buy it back from you.
Common stock represents the majority of stocks. Their claims on assets are handled at the very end if a company is to go bankrupt. They represent higher risk than preferred stocks, but also potentially higher gains.
Stocks also often come with various labels. Although they don't represent any sort of specific type of stock, they are terms you'll likely run into. A few of the common ones are:
Blue Chip Stocks - Stocks from well know companies that have been around awhile. They tend to pay out dividends often.
Value Stocks - Stocks for companies that are performing better than the cost of the stock represents.
Growth Stocks - Stocks for companies that are growing at a rapid pace. Dividends are not usually paid out for growth stocks. The company uses profits to continually grow.
That does it for today. Check back later for more Stock Market 101 tips.
Preferred stocks tend to offer a fixed dividend rate. Dividends are profits that the company spreads amongst its shareholders. If a company goes bankrupt, preferred stockholders have their claims come before common stock. Companies often have the option to reclaim their preferred stocks. Meaning, at any time, they could buy it back from you.
Common stock represents the majority of stocks. Their claims on assets are handled at the very end if a company is to go bankrupt. They represent higher risk than preferred stocks, but also potentially higher gains.
Stocks also often come with various labels. Although they don't represent any sort of specific type of stock, they are terms you'll likely run into. A few of the common ones are:
Blue Chip Stocks - Stocks from well know companies that have been around awhile. They tend to pay out dividends often.
Value Stocks - Stocks for companies that are performing better than the cost of the stock represents.
Growth Stocks - Stocks for companies that are growing at a rapid pace. Dividends are not usually paid out for growth stocks. The company uses profits to continually grow.
That does it for today. Check back later for more Stock Market 101 tips.
What is a Stock?
Welcome to Stock Market 101. I, like many people, have often wondered what the heck is going on in the stock market. I'll be the first to admit, I've spent most of my life being entirely clueless. Everyday on the news we hear about about what the stock market did today. When the stock market is on a downturn, we tend to hear about overall economic problems. I decided that if it's that important, I better get a handle on it.
I created Stock Market 101 as a place for people to join my ride into learning about stocks. I've always found the best way for me to learn is to try and teach. As I learn new things, I'll share them here and hopefully we can all be better for it.
This first post is a basic explanation of what a stock even is. A stock represents part ownership of a company, or a "share" of its ownership. When you own a stock, you own a slice of that company. Now, realistically, you don't have any real say in what goes on in the company. When you purchase a share, you assume the same risks you'd take on in owning that business. If it fails, your stock will be worthless, if it succeeds, your stock will increase in value. When you own a stock, you have a claim to the assets of the company. Fortunately, stockholders don't assume liability for the company. If the company released a faulty product, for example, you wouldn't risk facing a lawsuit. However, such news would likely hurt the company and the value of your shares.
There can be a bit more too it, but that's essentially all a stock is. A piece of paper giving you a small sliver of ownership.
I created Stock Market 101 as a place for people to join my ride into learning about stocks. I've always found the best way for me to learn is to try and teach. As I learn new things, I'll share them here and hopefully we can all be better for it.
This first post is a basic explanation of what a stock even is. A stock represents part ownership of a company, or a "share" of its ownership. When you own a stock, you own a slice of that company. Now, realistically, you don't have any real say in what goes on in the company. When you purchase a share, you assume the same risks you'd take on in owning that business. If it fails, your stock will be worthless, if it succeeds, your stock will increase in value. When you own a stock, you have a claim to the assets of the company. Fortunately, stockholders don't assume liability for the company. If the company released a faulty product, for example, you wouldn't risk facing a lawsuit. However, such news would likely hurt the company and the value of your shares.
There can be a bit more too it, but that's essentially all a stock is. A piece of paper giving you a small sliver of ownership.
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