investing

What is an index

A measure that tracks the performance of a group of stocks

What are the three main indexes

S&P 500, Nasdaq, and Dow Jones

What is market cap

A companies total value in the stock market

How do you calculate market cap

Total number of outstanding shares x current price of stock

What are all the different cap sizes

Mega cap, Large Cap, Mid Cap, Small cap, micro cap.

What is it called when a company sells its stock

IPO process

Why do companies sell its stock

To raise capital and expand

Who does investors usually sell its stock to first

Initial investors

What is a share of stock

A share of stock is a single unit of ownership in a company

What is it called when a company owns shares of itself

Treasury

How is the price of a companies stock determined

Supply and demand

How often does a public company have to announce their earnings

Quarterly, 4 times a year

if an investor wants to buy a specific companies stock, how can they do it

Brokerages

What is a brokerage

A brokerage is a financial firm that offers help for investors with many services like carrying out trades, and gives advice

3 examples of brokerages

Charles Schwab, fidelity, merril lynch

What are the two primary ways to make money while owning stock

Capital gain and dividends

What is a dividend

A company paying back its profits to its shareholders

who decides the amount of a dividend

The board of directors

How often are dividends usually paid

Quarterly

Who are dividends paid to

A companies shareholders

What are the two main exchanges

NYSE(traditional and established) and NASDAQ(more technology focused)

What exchange houses stocks that have been delisted

OTC

What does EPS tell us

tells us how much a company earns for each share of its stock

How do you calculate EPS

Net income/Outsanding shares

EPS uses

Value a stock, compare companies in industry

What is PE RATIO used for

Shows how much investors are willing to pay per dollar of earnings, higher PE RATIO=people willing to pay more in stock

What is the formula for PE ratio

Share price/Earnings per share

What does “buying long” mean

Buy low sell high

When comparing companies within the same industry what tool should you use

PE ratio

What is he greatest advantage to diversification in a stock portfolio

Much lower risk

What does beta represent

A stocks volatility

What is a stocks split 

Increases the number of outstanding shares, for example you have 1- shares of a 100$ stock, the company offers a 2x stock split, you now have 20 shares of 50$ stock

Income stock 

Least volatile, 3% yield or higher, gives dividends 

Growth stock

Reinvest profit, generally no dividend, higher PE than industry average, investing in future potential

Value stock

Share price is lower than value, Pe ratio lower than industry average, bad publicity and earnings, could materialize into big gain, affected by public perception 

Penny stock

Small/Micro cap, trades for less than 5$, done with OTC, very risky, no minimum standards

Speculative

Does well in bull markets and does poorly in bear market, risky, fluctuates in price, investing in the idea but bad fundamentals