Stock Market Fundamentals

Are you interested in investing in the stock market? Investing is a time-tested way of making your money work for you. By investing your money on a regular basis, you may be able to maintain and increase your wealth over time. However, it’s important to know that investing in the stock market comes with risks. Before getting started, you should have a basic understanding of the stock market. In today’s blog, we will be going over stock market fundamentals.

What are Stocks?

Also known as equity, a stock is a security that represents your ownership of a fraction of a company. The units of stocks are known as “shares,” which entitle the stock owner to a portion of the company’s assets and profits—depending on much stock they own. Stocks are purchased and sold predominantly on stock exchanges and serve as the foundation of many investors’ portfolios.

What are the Benefits and Risks of Stocks?

Investing in stocks offers individuals the potential for capital appreciation (growth)- especially in the long run. With careful research and patience, you can grow your wealth significantly. However, the stock market doesn’t always go up. There’s no guarantee that the company whose stock you own won’t go down. You have to be aware of the fact that investing in the stock market is also risky. However, the risk of buying stock in a company can be slightly offset by investing in several different companies. It may also be a good idea to consider investing in other assets, such as bonds.

What Kinds of Stock are There?

There are two primary types of stocks, common stock and preferred stock.

  • Common Stock – Common stock owners are entitled to vote at shareholder meetings and receive dividends (after preferred shareholders).
  • Preferred Stock – Preferred stock owners don’t commonly have voting rights but they have priority over common stock owners regarding dividend payments. They also have preferred claims on company assets. This benefit is especially vital if the company goes bankrupt and its assets are liquidated. Preferred stockholders will be paid first.

How Do I Buy and Sell Stock?

You can purchase and sell stocks via the following methods:

  • A Discount or Full-Service Broker – Brokers buy and sell shares for clients for a fee, also known as a commission.
  • Direct Stock Plan – Several companies allow individuals to purchase or sell stock directly through them without a broker. While this may save you on the commission, you may have to pay other fees to the plan. Direct stock plans vary by company, so you’ll have to conduct research before getting started.
  • Dividend Reinvestment Plan – This plan allows individuals to buy more shares of stock they already own by reinvesting dividend payments to the company (check with a broker or the company to see if you will be charged for this service).
  • Stock Fund – Stock funds describe a type of investment company, like mutual funds or exchange traded funds, that invest in stocks. Depending on its policies and objectives, a stock fund may focus on shares of a particular type of company (such as large-cap value stocks, mid-cap growth stocks, or blue chips). This type of stock can be purchased directly from the company or with a broker/advisor.

Let’s Talk About It

The key to getting started in stock market investments successfully is by learning the terms, asking questions, and working with a professional. You work hard for your money, and your money should work hard for you. At Elite Wealth Management, one of our top goals is to help you put your money to its best use with investment strategies tailored to your objectives and goals. We start by getting to know you and your financial goals to carefully plan your personalized investment plan. We can analyze your current portfolio and help you determine whether your it represents your objectives. We will work together to identify, evaluate, and integrate a diverse investment strategy into your portfolio. We will answer your questions about your options and discuss all the necessary considerations before getting started. Let’s work together to get your financial goals accomplished. Elite Wealth Management is in San Diego but works with clients all over. We’re always happy to help you with all of your wealth management needs. Reach out by calling (323) 314-0202 or clicking here.