Stock Market 101

The stock market or as it is sometimes known is a private or public arena for trading of a companies stock and/or its derivatives at an agreed upon price. These are considered the securities that are listed on the public stock exchange and the ones that are traded privately. Stock prices are set by a number of factors. The general consensus is that these prices are set by the long-term earnings potential of a company. The earnings prospects for the future are how investors decide what company to put an investment in.The NYSE or New York Stock Exchange is actually a physical exchange. You can only trade stocks that are listed on this exchange. These are also the stocks that are traded on the floor.The NASDAQ is a virtual exchange. In other words it’s listed on the computer network. The trade process here is quite similar to that of the NYSE. Everything is done over a computer network for making an investment.A small cap is considered a company that has anywhere from 250 million to 1 billion dollars in capitalization. And the flip side of this is the large cap. A large cap is a company that holds more than 10 billion dollars in capitalization. The way we figure out market capitalization is by multiplying the number of a company’s shares outstanding by its stock price per share.Dividends are payments made to a shareholder by a corporation. This money comes from the company’s surplus profits. A T-Bond or treasury bond is a marketable US government debt security that has a fixed interest rate and the maturity rate is ten years. These bonds make interest payments semi-annually and this money is only taxed at the federal level.Now that you have a little more insight into the stock market you should be able to make a great long term investment.

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