What are Some Stock Market Basics?

What are some Stock Market Basics?. We examine the basics of Stocks and the Stock Market.

For those who are just starting with investments, they need to have some stock market basics before they invest large amounts of money. Some of these basics include knowing what the terms used in the stock market are.

Preferred stock - represents ownership in a corporation. This type of stock guarantees a dividend that is set down in advance and unless the stock is retired or called back, it will keep paying that dividend forever.

Common Stock - also represents ownership in a corporation, but the dividends can be paid in one of three forms- cash, stocks or property. Cash dividends are regarded as investment income and are taxable. Stock dividends are dividends paid out in the form of additional stock shares in the corporation, or shares of a subsidiary corporation. They are usually issued in proportion to shares owned. Property dividends are paid with assets owned by the issuing company. Property dividends are usually paid in the form of products or services that the corporation produces.

As part owner of a corporation, you may be entitled to share in the profits of the company. There is also a chance that the company will grow and the price of the stock may go up.

Bear market - this is a term used to describe a period when the market prices are down. The economy usually slows down, and unemployment and inflation are high. Bull market - this is a term used to describe a period when the market prices are up. During this time, economic production is strong, jobs are plentiful and inflation is low.

In addition to preferred and common stocks, other kinds of stocks are bought and sold. These include blue chip stocks, penny stocks, income stocks, and value stocks. As you become more familiar with the basics of the stock market, these terms will also become more familiar and you may find yourself investing in some of them.