Intro to Stock Market

What exactly is a stock and why do companies sell stock in the first place?
A stock is essentially buying you a part of a company. In a sense, it gives you part-ownership to the company because you are investing in it. You are taking your chances and letting them use your money for it to expand. Stocks are a way for businesses to make use of your money, spend it in hopes of profit so that the company grows like todays huge corporations, such as Microsoft or Google. In this way, the stock value increases. What you first invested in a stock for, let's say, $10 may have increased to $15. At the same token, a stock can lose value, and so the value of stock purchased goes down and no profit is gained. Companies sell stocks as a way to "raise money", it helps them become more powerful, the head of the company gets richer, and t the same time, the investor gains money. This can go either way however, a company can be a complete flop and money is lost.

What is the difference between a public and a private company?
The difference between a public company to a private one is that a public company allows ownership of their company by way of stocks. Any individual can buys shares of stocks and have a piece of the company that is invested upon. However, in a private company, there is no stock to buy. A company that is private will not sell stocks to individuals, or more specifically, to the general public.

What is the Dow Jones Industrial Average?
The Dow Jones Industrial Average is based upon 30 of the top industrial companies within the United States and give insight as to how the economy is doing. These major industries sell their stock by the load which is why they are relied upon to see how stable and at what level the economy is. It is only one of the stock market indexes that were created to keep track of the industrial component of the United States' stock market and is also the oldest continuing U.S. market index.

What is a blue chip stock?
A blue chip stock is what most consider a stock that is safe to buy. It will neither raise too high or decrease at unbelievable rates. It is stable throughout and remains at an equilibrium balance. These blue chip stocks usually come from huge corporations that are very strong and have their own hold on the stock market, which is why they don't go too high or low. These companies are usually food companies or something of this nature.

What is the New York Stock Exchange and the NASDAQ?
The New York Stock Exchange is held in New York City, Wall Street to be more precise, and is the epicenter of stock buying/selling. It consist of more than 2500 companies and weigh the economy by consumer demand, which is how stocks are priced. A key feature of the NYSE is that is provides a fair and balanced way for stocks to be auctioned to the public in such a way that price for stocks are traded efficiently.
The NASDAQ, or National Association of Securities Dealers Automated Quotations, is the largest electronic based stock exchange market in the United States. At a little over 3000 companies listed, its used to show the most average trades than any stock market.

What is a mutual fund?
A mutual fund is a form of collective investments that are monitored at all times. In short, someone is watching over an individuals stock. A collective group of people are in charge of another's money and buy/sell according to what they think is best. Of course, for watching over another's stock, the investors get a percentage, or share of the profits made from the stock of an individual. The fund manager will manage gains or losses and collects the dividend or interest income. The share values are calculated by dividing the total value of the fund with number of shares that are issued and outstanding.

What are some of the biggest companies on the stock market, how much is their stock?
Some of the biggest companies on the market are:
-Exxon: $469.60
-Google: $504.14
-Apple: $122.14
-General Electric: $35.78
-Microsoft: $29.30
-JP Morgan Chase & Co.: $48.25

What is the PE ratio of a stock?
The PE ratio of a stock is the price to earnings ratio of a certain stock. It is the price per stock over earning per share. Statistically, a higher PE ratio indicates that stock holders are paying too much for their shares and the lower PE ratio is just the opposite.

What is a stock dividend?
A stock dividend are payments paid to stockholders by their company. A company that issues dividends takes a portion of its earnings and gives it shareholders of that pertaining company.