Stock Basics

This page presents Stock Basics.

A stock is a share you own in a company that has raised capital through the issue of shares.

The shares you own entitle you to an ownership interest which is often called equity. This is why you often hear people say that "they own X% shares in a company's stock"



Did you know that in the past when you owned stock you often received paper stock certificates?

How times have changed!



Types of Stock

There are two main types of stock that you as an investor can own in a company:

Common Stock Preferred Stock As a Common stock investor you may receive voting rights in connection with your stock ownership stake. Also, depending on the stock you own, you may receive dividend payments as well.

Your main objective like all investors, is that the shares you have purchased may increase in value and the company performs well. Why?

Well, so that other investors can be attracted to the stock and their purchases of the stock you already own will drive up the price; allowing you to make a profit.

As an individual stock investors you are not the only one who can own stock in a company.Insiders like company executives, individual directors or employees, as well as large institutions like mutual funds and pension or retirement accounts may become stock owners too!

Potentially this is good news!You know why?

Because with all the level of access and analytical resources these other stock owners have, you can track their activities in a stock and this may provide you with insight into the company'sprospects.

Don't use this information or analysis as a clear cut sign! Always do your research! Conduct further analysis!

Market Capitalization

In terms of its stock, a company is generally classified in terms of its market capitalization,or "market cap,".

How is market capitalization calculated?

Ready for some math?

Multiply the share price of the company by the number of shares outstanding. That simple!

For example - Google has over 300 million shares outstanding. Its share price is $602 (as of this article writing). This means Google's market capitalization is over $180 billion!

That is a lot of money!

So let me ask you - do you think that Google is a small cap, mid-cap or large-cap company?Here is a break-down that might help answer that question:

Small-Cap companies are those with capitalization of between $250 million and $2 billion

Mid-Caps fall between $2 billion and $10 billion

Large-Caps - or "blue chips" - are those generally above $10 billion.

Based on the above breakdown - Google is a large-cap or a "blue chip company.

Stock Trading hours

Most stocks are traded between 9:30 AM to 4:00 PM EST.

With the introduction of electronic exchanges like the Nasdaq there has been a lot more stock trading that happens pre- and post-market hours as well.

Be careful if your decide to participate in after hours stock trading.



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