Professor Savings here. We teach finance basics. Today we are going to talk about stock market basics.
How to many money with stocks? Stock is a type of investment. A stock is a shared ownership of a company.
One way to make money is when a stock price appreciates. This when price per share rises great than purchased price.
Look at Toby the hipster here. So Toby has $1000 to invest because he likes music. So he decides to invest in a company called pineapple.
He buys 10 shares shares and each share rises to $2000.
Cost is $1000. The proceeds are $2000. Net profit is $1000.
Return on investment is 100%. Dividends are profits that are paid out to shareholders.
Note that not all companies have dividends. Appreciation plus dividends equals total return.
Often in the finance circle people will ask, “How is the market?” They are referring to Dow Jones which are made up of 30 company stocks that people are tracking. Let’s break it down. These are called indexes.
In Dow Jones imagine tracking 30 companies. Another index called Standard and Poor and tracks 500 companies.
Are we in a bearish or bullish market. In general people are very pessimistic about the market.
In a bullish market people are rather optimistic on the outlook of the economy. But how does a market change from bullish to bearish or bearish to bullish.
Some factors may include economic data, finance performance, and global economy. So leads me to this question.
Why do people buy indexes. One reason is so that they can tack a type of stock with other types of stock in different industries.