Stocks and Investing. Course Objectives. Explain What is a Stock. Explain the Types of Stocks. Explain the Classification of Common Stock. Describe the Role of Beta in Your Portfolio. List the Various Stock Screening Criteria. Explain the Types of Analysis in Stock Trading.
Peter Looney works as an executive.
For a long time, Peter has felt that he should invest the extra amount of money that he makes from his job.
He has been saving in cash form for a long time.
However, he wants that he should use the saved amount to invest in something that could help him multiply his money and help grow his finances.
Peter has always thought of starting a business venture to grow his money, however, he is greatly averse to the huge amount of risk involved in any business venture.
So, Peter starts asking advice from his colleagues about what possible investment options are available in the market.
George, one of Peter’s colleagues, advices him to invest in stocks and mutual funds.
Stocks are the capital raised by a corporation through the issue of shares entitling holders to an ownership interest also known as ‘equity’.
‘Hidden Costs’ are the costs that you have to bear while investing in stocks that are not included in the ‘Explicit Costs’ and the ‘Implicit Costs’. Some of the ‘Hidden Costs’ that you should look out for while investing in stocks are as follows:
Sales Charges or Loads
Account Maintenance Fees
Interest on Margin Loans
Account Transfer Fees
Account Transfer Fees
Minimum Balance Fees
Account Transfer Fees:
‘Account Transfer Fees’ are the charges that you need to pay for moving assets either into or out of an existing account.
Let us look at each in detail.
Interest Rate Risk
Political or Regulatory Risk
It is very important that you should screen each and every stock that you intend to buy or sell before deciding on a purchase or sale.
Screening the stock carefully on certain crucial criteria will help you make informed and wise decision to safeguard your money against risk as well as losses.
Using all this research data, they then determine the intrinsic value of the company.
The value and image of the stock gets affected by fundamental analysis, especially when analysts forecast earnings which are significantly different than the market consensus.
The chief assumption on which ‘Fundamental Analysis’ is carried out is that the value of the stock can be determined based on the future earnings of the company.
Financial Analysts carry out thorough research on the background and operations of a company, the state of the industry to which the company belongs, the global industry and the global economy etc.
Technical Analysis intrinsic value of the company.
The chief assumption on which ‘Technical Analysis’ is carried out is that supply and demand are the key factors needed to understand stock prices and market trends.
Therefore, the company’s value is determined in Technical Analysis by focusing on psychological factors such as greed and fear and also economic factors.
Price-to-Earnings Ratio (PE) intrinsic value of the company.
Buy and Hold Strategy intrinsic value of the company.
Buy and Hold Strategy:
A ‘Buy and Hold Strategy’ is the strategy of buying a financial asset and not selling it for an extended period of time. Hence, this is a long-term strategy. It proves to be very cost-effective.
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