Stock Investing

what are the five basic stock categories of market capitalization?

micro cap (less than $300 million) —> smallest and riskiest stocks available

small cap ($300 million to $2 billion) —> have plenty of growth potential

mid cap ($2 billion to $10 billion) —> have some of the safety of large caps because of their size and proven performance while retaining some of the growth potential of small caps

large cap ($10 billion to $200 billion) —> frequently referred as blue chips

ultra cap or mega cap (more than $200 billion)

what is market value?

the amount one would relatively get if they sold the asset in the current market at that moment

what dos murphy’s law state?

you will sell your stock at the worst possible moment

how do you calculate net worth?

net worth = total assets - total liabilities

what are some points to consider when evaluating the balance sheet?

is the money in your emergency fund sitting in an ultra-safe account and earning the highest interest available?

can you replace depreciating assets with appreciating assets?

can you replace low-yield investments with high-yield investments?

can you pay off any high-interest debt with funds from low-income assets?

if you’re carrying debt, are you using that money for an investment return that’s greater than the interest you’re paying?

can you sell any personal stuff for cash?

what does realocating mean?

selling some investments or other assets and reinvesting that money into something else

what does it mean to maintain a positive or negative cash flow?

positive cash flow —> helps increase net worth

negative cash flow —> depletes wealth and could wipe out net worth

what are dividends?

payments made to a stock owner

what is the difference between interest and dividends?

interest is paid to creditors, and dividends are paid to owners (or shareholders)

what is a yield?

an investment’s dividend payout expressed as a percentage of the investment amount

how do you calculate yield?

yield = payout / investment amount

if someone is a conservative stock investor, they place money in companies that exhibit what qualities?

proven performance, large market size, proven market leadership, and perceived staying power

if someone is an aggressive stock investor, they place money in companies that exhibit what qualities?

great potential, capital gains possibility, and innovation