Stocks are typically traded on stock exchanges, such as the New York Stock Exchange (NYSE) or NASDAQ, where buyers and sellers come together to trade shares.
Here are some key concepts related to stocks:
1. Stock Market: A stock market is a marketplace where stocks and other securities are bought and sold. It provides a platform for companies to raise capital by selling shares to investors and for investors to buy and sell those shares.
2. Stock Exchanges: Stock exchanges are organised marketplaces where stocks and other securities are traded. They provide the infrastructure, rules, and regulations necessary for efficient and transparent trading.
Examples include the NYSE, NASDAQ, London Stock Exchange, and Tokyo Stock Exchange.
3. Stock Ticker Symbols: Each publicly traded company is assigned a unique stock ticker symbol, which is a combination of letters that represents the company's stock on the exchange. For example, Apple Inc. is traded under the ticker symbol AAPL.
4. Market Capitalisation: Market capitalisation, or market cap, is the total value of a company's outstanding shares. It is calculated by multiplying the current stock price by the number of outstanding shares.
Market cap is often used to categorise companies into different size categories, such as large-cap, mid-cap, and small-cap.
5. Dividends: Dividends are payments made by a company to its shareholders as a portion of its profits. Not all companies pay dividends, but those that do typically distribute them on a regular basis, such as quarterly or annually.
Dividends can provide a source of income for investors.
6. Price-to-Earnings Ratio (P/E Ratio): The P/E ratio is a common valuation metric used to assess a company's stock price relative to its earnings. It is calculated by dividing the current stock price by the earnings per share (EPS).
The P/E ratio is often used to compare companies within the same industry or to assess whether a stock is overvalued or undervalued.
7. Bull and Bear Markets: A bull market refers to a period of rising stock prices, typically accompanied by investor optimism and positive economic indicators.
Conversely, a bear market is characterised by falling stock prices and negative investor sentiment. Bull and bear markets are part of the natural cycles of the stock market.
8. Stock Indices: Stock indices are benchmark measures that track the performance of a group of stocks in a particular market or sector. Examples include the S&P 500, Dow Jones Industrial Average (DJIA), and FTSE 100.
Stock indices provide a snapshot of the overall market or specific sectors and are used as indicators of market performance.
Understanding these fundamental concepts can provide a foundation for further exploration into the world of stocks and investing. Keep in mind that investing in stocks involves risks, and it's important to conduct thorough research and consider professional advice before making investment decisions.