This article and the ones that follow should give you a solid foundation in the knowledge of stocks and their use as financial instruments.
We have established the basic structure of a common stock share: a company issues stock to raise capital, the owner of the stock is entitled to participate in the profits of the company, and stocks are traded in the Secondary Market between buyers and sellers who assume the risk and receive any proceeds that arise from price changes.
The concept of risk—where taking greater risk entitles the bearer of the risk to greater potential returns (and losses)—is a fundamental tenet of investing. The shares and other instruments are “securitized” – that is, brought into being as financial instruments, and when investors buy them they gain equity but also assume risk.
If the company grows and succeeds and investors bid up its price, shareholders win. But the opposite can also be true.
This is where fundamental and technical analysis of stocks and companies is critical – it can help investors decide which risks are worth taking.
What is the difference between Common Stock and Preferred Stock?
What is the Difference Between a Growth and Value Stock?
Value Stock is a stock whose price has been deemed a value buy because of fundamentals, book value, and projected earnings
A strike price names the price of the underlying security in an options contract at which the underlying security will trade
A warrant is an agreement giving the holder the right to buy (or sell) a certain number of shares of a company
The concept of the gearing ratio can be better understood by equating it with another familiar financial concept: the debt-to-equity ratio.
A Bear Straddle is another name for a short straddle, in which the investor writes (goes short) on both a call and a put
Profit is a term that is synonymous with earnings and net income, it is basically what is left of revenue after expenses
It’s good to have the opinion of advisors who are knowledgeable in various areas of your planning and portfolio, but...
Buying a stock means taking an ownership position in a publicly traded company. Once you purchase a stock, you...
The CAC 40 Index is a tool used by traders and investors to monitor the performance of the French stock market and make investment decisions.
Market neutral funds might be hedge funds or mutual funds or ETFs whose strategy is not based on bullish or bearish...