1) What is a stock?
Ans : A stock represents ownership in a company. When you own a stock, you have a share of that company’s assets and earnings.
2) What is the stock market?
Ans : The stock market is a marketplace where investors buy and sell shares of publicly traded companies.
3) What is a public company?
Ans : A public company is one whose shares are available for purchase by the general public through a stock exchange.
4) What are stock exchanges?
Ans : Stock exchanges are platforms where stocks are traded. Examples include the New York Stock Exchange (NYSE) and NASDAQ.
5) What’s the difference between common and preferred stock?
Ans : Common stock represents ownership in the company and typically includes voting rights. Preferred stock usually doesn’t have voting rights but has a higher claim on assets and earnings.
6) Who are the major participants in the stock market?
Ans : Investors, brokers, and companies are the key participants. Investors buy and sell stocks, brokers facilitate these transactions, and companies issue stocks.
7) What do brokers do?
Ans : Brokers act as intermediaries between investors and the stock exchange, executing buy and sell orders and providing investment advice.
8) Why do companies issue stocks?
Ans : Companies issue stocks to raise capital for various purposes, such as expanding operations or paying off debt.
9) How are stock prices determined?
Ans : Stock prices are influenced by the forces of supply and demand. High demand typically drives prices up, while high supply can push prices down.
10) What’s the difference between market orders and limit orders?
Ans : Market orders are executed immediately at the current market price. Limit orders allow investors to specify the price at which they want to buy or sell a stock.
11) What is the Dow Jones Industrial Average (DJIA)?
Ans : The DJIA is an index that tracks the performance of 30 large, publicly-owned companies in the United States.
12) What is the S&P 500?
Ans : The S&P 500 is an index that measures the performance of 500 of the largest companies in the U.S.
13) What is the NASDAQ Composite?
Ans : The NASDAQ Composite is an index comprising many technology and internet-based companies.
14) What is long-term investing?
Ans : Long-term investing involves buying and holding stocks for extended periods, typically with a horizon of several years.
15) What is intraday trading?
Ans : intraday trading is a short-term strategy involving buying and selling stocks within the same trading day.
16) What is value investing?
Ans : Value investing involves seeking undervalued stocks with the belief that their true value will be recognized by the market over time.
17) Why is the stock market considered risky?
Ans : The stock market can be highly volatile, and investments are subject to market fluctuations.
18) What is diversification?
Ans : Diversification is the practice of spreading investments across various stocks and asset classes to reduce risk.
19) What are dividends?
Ans : Dividends are payments made by some companies to shareholders as a portion of their earnings.
20) How do I research a company before investing in its stock?
Ans : Research includes studying financial statements, market trends, and the company’s competitive position.
21) When should I buy or sell a stock?
Ans : Timing stock purchases and sales depends on various factors, including your investment goals and market conditions.
22) What are the tax implications of buying and selling stocks?
Ans : Taxation on capital gains and dividends varies depending on the country and your individual circumstances.
23) What is a stock market order book?
Ans :The order book displays the list of buy and sell orders for a particular stock, including the prices at which people are willing to buy and sell.
24) What is a stock trading platform or brokerage account?
Ans : A trading platform or brokerage account is an online service that allows you to buy and sell stocks.
25) What are stock market crashes and corrections?
Answer :A crash is a sudden, severe decline in stock prices, while a correction is a more moderate decline.
26) What is an initial public offering (IPO)?
Answer : An IPO is the first sale of a company’s stock to the public.
27) What is “buy and hold”?
Answer :”Buy and hold” is a long-term investment strategy where you purchase stocks and hold them for a significant period, often with the belief that they will appreciate in value.
28) What is “swing trading”?
Answer : Swing trading is a strategy where investors seek to profit from short- to medium-term price movements by buying low and selling high.
29) What is “momentum trading”?
Answer : Momentum trading involves buying stocks that have shown recent strong price performance, with the expectation that this trend will continue.
30) What is a market order?
Answer : A market order is an order to buy or sell a stock at the current market price. It’s executed immediately.
31) What is a stop-loss order?
Answer : A stop-loss order is an order to sell a stock if it reaches a certain price, helping to limit potential losses.
32) What is fundamental analysis?
Answer : Fundamental analysis involves evaluating a company’s financial health, including its earnings, revenue, and balance sheet, to determine its intrinsic value.
33) What is technical analysis?
Answer :Technical analysis involves analyzing a stock’s price and volume charts to predict future price movements based on historical patterns.
34) How does psychology affect stock market trading?
Answer : Emotions like fear and greed can lead to impulsive decisions, which can result in losses.
35) What is FOMO (Fear of Missing Out) in stock trading?
Answer : FOMO refers to the fear of missing out on a potentially profitable investment opportunity.
36) Why is the stock market so volatile?
Answer : Volatility is caused by a range of factors, including economic events, news, and investor sentiment.
37) What are circuit breakers in the stock market?
Answer : Circuit breakers are mechanisms that temporarily halt trading to prevent rapid, extreme price movements.
38) What are the key financial statements for evaluating a company’s stock?
Answer : The key financial statements include the income statement, balance sheet, and cash flow statement.
39) What is risk management in stock trading?
Answer : Risk management involves strategies to protect your capital, including setting stop-loss orders and position sizing.
40) What is a bull market?
Answer : A bull market is characterized by rising stock prices and optimism about the economy.
41) What is a bear market?
Answer : A bear market is characterized by falling stock prices and pessimism about the economy.
42) What is a blue-chip stock?
Answer : Blue-chip stocks are shares of well-established, financially stable companies with a history of strong performance.
43) What is a penny stock?
Answer : Penny stocks are low-priced stocks, often with high volatility and relatively low market capitalization.
44) How is the stock market regulated?
Answer : Stock markets are regulated by government agencies to ensure fairness, transparency, and investor protection.
45) What is insider trading, and why is it illegal?
Answer : Insider trading is the illegal practice of trading stocks based on non-public, material information about a company.
46) What is dollar-cost averaging?
Answer : Dollar-cost averaging involves investing a fixed amount of money at regular intervals, which can reduce the impact of market volatility over time.
47) Are there stock markets in other countries?
Answer : Yes, many countries have their own stock exchanges, and investors can trade in international markets.
48) What were some historic stock market crashes?
Answer : Notable crashes include the Great Depression crash of 1929, the dot-com bubble burst in 2000, and the global financial crisis in 2008.
49) How can I prepare for a stock market downturn?
Answer : Diversifying your portfolio, setting stop-loss orders, and having a long-term perspective are strategies to prepare for market downturns.
