From OTC’s to Mutual Funds, Money Market Accounts to Individual Brokerage Accounts, get a grassroots perspective on the general scope of investing.
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Stocks Made Simple
The simplest definition of a stock is “owned shares issued by a corporation.” The separation of ownership & control limits the liability of both the corporation & the shareholder, meaning, the corporation’s assets are not the property of the shareholder & the personal property of an employee of a corporation are not connected to the corporation Itself. As a shareholder you have three basic rights:
1. Right to vote in shareholder meetings.
2. Receive dividend.
3. Sell your shares.
Being a shareholder entitles you to receive a portion of the company’s profits. The more shares you own, the greater the return will be once the company makes a profit. Although this sounds pretty cut & dry please make a note: INVESTING IS A RISKY BUSINESS & THERE ARE NO GUARANTEES. JUST AS YOU COULD BECOME EXTREMELY SUCCESSFUL, YOU COULD ALSO LOOSE EVERYTHING. INVEST WITH CAUTION☠
Important Stock Terms:
Ask/Bid: This is the asking price between buyers & sellers of shares of stock. Buyers set the Ask & sellers set the Bid when attempting to either buy or sell stocks. The actual cost of the stock is normally somewhere between the Ask & the Bid.
Market Capitalization: The total dollar market value of a company’s outstanding shares. The formula for calculating the market cap of a company is:
Shares Outstanding x 1 Share=
Shares Outstanding: The amount of shares in a company’s stock currently held by all of its shareholders.
Beta: The measurement of the volatility of a stock or a portfolio in comparison to the market as a whole. A value of 1 means the stock moves with the market, less than 1 means the stock has less volatility than the market & a value of more than 1 means the stock typically moves ahead of the market.
A brokerage account is simply the establishment of a deposit account between an investor & a licensed brokerage from which the investor can execute investment orders. Brokerage Firms are one of two types, either full service or discounted “DIY” firms. Full service brokerages offer an array of products & services from a financial advisor/planner to 0% commissions fee on the buying or selling of investments in exchange for an advisory fee. The discount brokerage firms typically charge a flat fee for each transaction, with sweep deposits (transfers of your uninvested cash into a money market account) being among one of the many strongpoints of the DIY platform. In closing, the brokerage account is nothing more than a deposit account an investor secures with a brokerage firm to execute the buying & selling of investments.