The Stock Market is a network of companies where people can buy stocks of different companies. Some specific stock exchanges are the NYSE ad Nasdaq. Stock market trading happens every weekday 9:30 ET - 4:00 PM.
Shares represent units of ownership in a company. When you purchase shares, you become a shareholder and gain a claim on part of the company's assets and earnings. Shares can be classified into two main types: common shares and preferred shares. Common shareholders typically have voting rights, while preferred shareholders have a higher claim on assets and earnings.
Dividends are payments made by a corporation to its shareholders, usually derived from profits. Companies may distribute dividends as cash payments or additional shares of stock. Not all companies pay dividends; some reinvest profits back into the business for growth. Dividend-paying stocks can provide a steady income stream for investors.
Market capitalization, or market cap, refers to the total value of a company's outstanding shares of stock. It is calculated by multiplying the current share price by the total number of outstanding shares. Market cap helps investors assess a company's size and growth potential. Companies are often categorized as small-cap, mid-cap, or large-cap based on their market capitalization.
A bull market is characterized by rising stock prices and investor confidence. It typically occurs when the economy is strong, unemployment is low, and corporate profits are high. Bull markets can last for extended periods, but they may also be followed by corrections or bear markets.
A bear market occurs when stock prices fall by 20% or more from recent highs, often accompanied by widespread pessimism and negative investor sentiment. Bear markets can be triggered by economic downturns, rising interest rates, or geopolitical events. Investors often seek safer investments during bear markets.
Common stocks represent ownership in a company and entitle shareholders to vote on corporate matters. They typically offer potential for capital appreciation but come with higher risk.
Preferred stocks provide dividends before common stocks and have priority over common stocks in the event of liquidation. They generally offer lower risk but also lower potential returns compared to common stocks.