Introduction to the Stock Market

1. What exactly is a stock and why do companies sell stock in the first place?
A stock is a source of money for a company. Companies have two options when raising money, either get a loan or open up your own stock. Then consumers like you and I purchase or invest in these stalks, our ownership in the stalk is called a share. When the company prospers then the owners of shares prosper too and the value of their part increases. However when the company doesn't do well then share owners don't do good either. That is the gamble in buying stocks.

2. What is the difference between a public and a private company?
A public company sells stocks to the general public and the stock is traded on an exchange. Meanwhile, a private company does not sell stock to the general public, and the stock is not traded on an exchange. In private firms, the stockholders are usually the principals in the company. Private companies also have no obligation to make their financial information public while a public company is required to file their information.

3. What is the Dow Jones Industrial Average?
The Dow Jones Industrial Average, also known as the Dow 30 is an index which shows how 30 large publicly owned companies based in the United States have traded during a standard trading session in the stock market.

4. What is a blue chip stock?
A blue chip stock is the stock of a well established and financially stable/ sound company that has demonstrated that has demonstrated its ability to pay dividends in both good and financially sour times.

5. What is the New York Stock Exchange and the NASDAQ?
The New York Stock exchange is a stock trading market, which is located in Wall street Manhattan. By market capitalization it is the Worlds largest stock exchange. The New York Stock exchange or the NYSE is responsible for setting policies, supervising member activities, listing securities, and overseeing the transfer of member seats, as well as evaluating applicants. The NASDAQ, stands for National Association of securities Dealers Automated Quotations. This is a computerized data system to provide brokers for price quotations. It was created in 1971 and it was the worlds first electronic stalk market.

6. What is a mutual fund and how do they operate, why can they be good?
A mutual fund pools money together from thousands of small investors and then its manager buys stocks, bonds or other securities with it. When you contribute money to these funds you get a stake in all its investments. Each of these funds has operating rules put in place to help define what sort of investments the fund can make. Mutual funds are bought and sold by the "share". Mutual Funds offer the benefit of diversification, but they do involve risk. Both fees and taxes can decrease the return on the investment you see with a mutual fund. The price that investors pay for a mutual fund is called the net asset value or the NAV. Mutual funds can be considered good because they give you the advantage of being professionally managed. Mutual funds can also be considered good because they're considered redeemable. The investor can sell the shares back to the fund whenever they choose.

7. What are some of the biggest companies on the stock market (in total value of their stock?)