Stock Basics

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• What is a Stock Market?
  The market in which shares are issued and traded either through exchanges or over-the-counter markets. Also known as the equity market, it is one of the most vital areas of a market economy as it provides companies with access to capital and investors with a slice of ownership in the company and the potential of gains based on the company's future performance. This market can be split into two main sections: the primary and secondary market. The primary market is where new issues are first offered, with any subsequent trading going on in the secondary market.
• What is a Stock?

  A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings.
  

  There are two main types of stock: common and preferred.
  - Common stock usually entitles the owner to vote at shareholders' meetings and to receive dividends.

  - Preferred stock generally does not have voting rights, but has a higher claim on assets and earnings than the common shares. Also known as "shares" or "equity".

  A holder of stock (a shareholder) has a claim to a part of the corporation's assets and earnings. In other words, a shareholder is an owner of a company. Ownership is determined by the number of shares a person owns relative to the number of outstanding shares.
• How Does a Company Sell Stock?
  In order for the public to buy stock in a company, the company first has to issue it. They do this by going to an underwriter. They tell this group how many shares of stock they want to issue to the public, and the underwriter sets a price for the stock and sells it in an Initial Public Offering (IPO).
• Why Do Companies Sell Stock?
  Companies sell stock in order to gain money that will allow them to grow and buy more things. Some companies cannot afford to keep growing on their own so they sell parts of the company to shareholders.
• What is a penny stock?
  A penny stock is stock of a company that is often very small and will most likely never become a large company. These stocks are usually very cheap (under $2).
• What is a growth stock?
  A growth stock is stock of a company that may be growing rapidly or have a lot of potential for success.
• What is a Blue Chip stock?
  Blue chip stocks are stocks of large, well-known companies.
• What is a ticker symbol?
  A ticker symbol is the unique alphabetic name which identifies the stock. If you are looking for stock quotes online, you always search for a company by the ticker symbol. Generally speaking, exchange-listed stocks have three letters or less, while NASDAQ-listed stocks have four letters or more.
• What is a Price/Earnings Ratio?
  The Price/Earnings ratio (also known as a P/E ratio) is calculated by dividing the current stock price by earnings per share from the last four quarters.
• What is Trading Volume?
  A trading volume figure shows the total number of shares traded for the day, listed in hundreds. To get the actual number traded, add "00" to the end of the number listed.
• What is a Bear market?
  A bear market is a period when most stocks are declining in value
• What is a Bull Market?
  A bull market is a period when most stocks are increasing in value.
• What is an index?
  An index is a group of stocks measured collectively. Examples of indices are the Dow Jones Industrial Average, the Nasdaq 100, and the S&P 500.