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Understanding Stocks

What role do stocks play in our economy and how do they fit in your personal financial plan. Learn how stocks are classified and why this information is important to investors.
  1. Stock Exchanges (5)
  2. Stock FAQ (6)

Investing in Stocks Information Center
Investing in stocks begins with a basic understanding of what stocks are, where they are traded and some fundamental rules.

Introduction to Stocks
Stocks are the basic units of ownership in publicly traded companies. There are two basic types of stocks.

Factors That Affect Stock Prices
How stock prices are set may seem like an alternate reality, however once you understand some of the factors it is less confusing.

Is the Stock Market Riskier or Does It Just Seem That Way?
When the economy and stock market is uncertain about the future, fear drives prices and trends.

When the Stock Market Is Headed Down
When the stock market heads down, investors need to understand what is happening and why and what they should and should not do.

How Stock Prices Are Set
The balance between supply and demand sets stock prices. When demand is high and supply is low, prices rise. When supply is high and demand is low, prices fall.

How Low Can Stock Prices Go?
Investors sometimes forget that there is no guarantee with stocks. They could lose their entire investment.

Why Invest in Stocks That Pay Dividends?
Stocks that pay dividends provide you with regular income, even if the stock's price is bouncing up and down.

Are Your Stocks Doing OK? How Do You Know?
Measuring the performance of your stocks requires information on competitors.

What Happens to Stock When Company Files Bankruptcy
What happens to your stock or bonds when a company goes bankrupt?

What Are the Main Types of Corporate Bankruptcy?
What are the main types of corporate bankruptcy?

Will You Get Any Money Bank When a Company Goes Bankrupt?
Whether stock or bond holders receive any money from bankruptcy proceeds depends on several factors.

Deflation Threatens Stock Investors, Economy
Deflation is the dramatic drop in prices across the board. There are too few buyers for too many goods.

Bull and Bear Stock Markets Two Sides of Same Coin
Bull and bear markets go together and are necessary for an efficient market.

Why Should Stock Investors Care About the Commercial Paper Market?
The commercial paper market is of vital importance to the economy. When it doesn't work, bad things happen.

Stock Investors should Avoid the Extremes
Stock investors would do well to avoid market and economic extremes as part of their investment plan.

Inflation Worse than Recession for many Stock Investors
Recession and inflation both pose dangers for the stock investor, however many fear inflation the most.

Following the Stock Market Herd Often Wrong Decision
Momentum in the stock market can be a powerful force, but it is often wrong because it is driven by emotion and not logic.

Supply and Demand Drive Stock Prices
Stock prices are driven by the relationship between buyers and sellers. Attractive stocks have more buyers than sellers, which drives up prices, while less attractive stocks feel the reverse effect.

Prepare Stocks for Bear Market
Bear markets happen, but if you prepare your mix of stocks and bonds you have a better chance of coming out with less damage.

Don't let Stock Market Disrupt your Plan
Turmoil in the stock market may tempt investors to drop their investment plan and react to the market. That's a bad idea.

Down Market May Be Good Time to Shop for Bargains
Buying in a market downturn may be a good way to pick up good stocks at bargain prices.

Stock Market Labels: Bear or Correction
The movement of the S&P 500 tells us whether the stock market is a bull, bear or in a correction.

When Stock Short Sellers get the Squeeze
Short sellers, who profit when stocks fall, sometimes get caught when the market moves against them. In covering their shorts, they create a mini-rally.

Don't try to Time Bottom of Falling Stock Market
You are making a mistake if you try to time when a down market will turn around. Research shows you are better off staying in the market.

Good Stories may make Good Stocks
Companies with compelling stories may sound attractive, but it takes more than interesting ideas to make a good stock investment.

Interest Rates and Stock Prices
The stock market closely watches interest rates for signs of change. Lower rates mean more money in the economy.

P/E is most Important Stock Valuation Tool
A stock's P/E is a key valuation measurement investors use to determine how much to pay for a stock.

Understanding What Affects Stock Prices
Investors are buying future growth when they invest in stocks.

Stocks Subject to Market Cycles
The stock market is subject to periodic sell-offs that do not necessarily indicate a long-term downward trend.

Companies with too much Cash: Good Stock Buy?
When a company has too much cash, how it deals with the situation tells you much about whether this is a stock to own.

Stocks Can't be Long-Term Forever
Stocks are a long-term investment and you shouldn't hold money you'll need in five years or less in stocks - they are too volatile.

Avoiding Pump and Dump Stock Scams
Pump and dump stock scams can cost you dearly if you fall for their hype.

Preferred Shares of Stock Not so Much
Preferred stock has some unique features, however don't let the name fool you, these shares leave much to be desired.

Betas Aid in Stock Trading - But which Beta do You Use?
Betas tell you a lot about a stock's volatility, however checking multiple web sites you may find different answers to that question.

Don't Worry about Average Return for Stocks - Focus on Best Stocks for You
Don't fall into the trap of expecting a 10% return from your investments because that's what the market's averaged.

Stock Sectors
Investors break the market down into sectors by company business. These sectors make is possible to compare how a stock is doing relative to its peers.

Understanding Stock Diversification
There two forms of diversification you should know to make your portfolio less volatile.

How the Fed Affects Stock Prices - What the Fed Does
The Fed is the single most important federal agency for stock market investors because its actions directly affect the markets.

Checking on Market Index Futures - What will the Market do Tomorrow?
Market index futures give you a clue about what traders think the market is going to do the next session.

Share Terms - Understanding Authorized, Restricted, Outstanding, Float
It is important for investors to understand the different terms used to describe shares of stock such as authorized, restricted, treasury, float and outstanding.

Inflation Dangerous to Stocks - Inflation Erodes Purchasing Power
Inflation is a major threat to the stock market and investors, especially those heavily invested in fixed income securities.

Cyclical and Non-Cyclical Stocks - How Cyclical and Non-Cyclical Stocks Differ
Cyclical and Non-Cyclical Stocks react differently in changing business cycles. Knowing the difference between Cyclical and Non-Cyclical Stocks can make you a smarter investor.

Real Rate of Return on Investments - Calculating the Real Rate of Return on...
The real rate of return on an investment factors in inflation and taxes to give you a clearer picture of how much your purchasing power has increased.

Understanding Indexes - What Market Indexes Tell Us (and What they don't)
Market indexes like the Dow, S&P 500 and Nasdaq Composite, can be useful tools if you understand what they do and do not represent.

Dividends - How Dividends Make You Money
Dividends are a way companies distribute a portion of their profits to shareholders.

Stock Splits - Are Stock Splits Good for Investors?
Stock splits occur when a company splits its outstanding shares, usually 2 for 1. This reduces the share price and increases the number of outstanding shares.

Stock Buybacks - Are Stock Buybacks Good for Investors
Stock buybacks can be a good deal for stockholders or a smokescreen to hide weak financial ratios.

The Other Two Asset Classes Every Stock Investor Should Know
Don't let poor decisions in picking bonds and cash products screw up your profits from stocks.

Measuring How Efficient a Company Uses It's Assets

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