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How Well Do You Know Stock Market Basics?

Stock Market Basics

The stock market is the collective place/term for buyers and sellers of stock securities. Common stocks provide the owner a proportionate interest in a company's assets, profits, and dividends. Preferred stocks offer the perk of a constant dividend. The stock type gets its attractive name from the increased value preferred stockholders get when bankruptcy happens. Sharing is caring in a company. Owning a stake in a company is called a share. Shares are what ownership is measured in.

Those investing in stocks need to know the relationship between risk and return. All stocks carry the risk to lose money. The lower the number, the lower the risk (above one is considered risky, below one is considered relatively safe). The greater the risk, the greater the expected return. A well-diversified portfolio mitigates risk. Savy players of the stock game attempt to "time the market," meaning they predict future stock market behaviors and attempt to buy before their company's price rises and sell before it falls, whether for company or industrial reasons.

The New York Stock Exchange dominates the lucrative landscape of stock trading. Investors buying and selling trade approximately 1.46 billion daily shares of publicly traded companies. Those investing in stocks do so short-term (less than a year) and long-term. Exchange-traded funds are funds that can also be traded on exchanges like a stock.