Everything You Need To Know About The Stock Market – Have you ever come across the “stonks” meme on your Facebook feed and wondered what the stocks actually are?

. Does that sound intimidating? Don’t worry, it’s one of the most common myths about stocks, and today we’re going to break it down (spoiler alert!). Most investors usually wonder whether it would be good for them to invest in stocks or not.

Everything You Need To Know About The Stock Market

But just like what we strongly advocate at UP JFA, it is very important to know and educate yourself, no matter how you want to tackle your investment plans and journey. Your understanding of the investment tools and opportunities available to you plays a huge factor in determining how successful you will be in achieving financial independence. Therefore, this article is written to help you avoid misunderstandings about stocks and guide you through the decision-making process.

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A share is a security that represents proportional ownership in the offering institution or company. It is also known as equity. People who own shares are either so-called

? Companies issue shares as a means of financing. In this case, companies are “borrowers-spenders” or institutions that need money, and shareholders are “lenders-savers”. A common reason why companies need financing is to raise funds or capital for business projects or operations (for example, when a company plans to expand its operations geographically). In sum,

Shares are traded on the stock exchange. A stock market is simply a marketplace where investors buy and sell stocks. Shares can be traded on one or more exchanges. Famous exchanges that you may have heard of are

Company to date. Wondering what companies are currently publicly listed in the Philippines? Visit this page. The PSE has its own stock market index consisting of 30 companies that represent the general movement of the Philippine stock market, which serves as a benchmark to measure the performance of the Philippine stock market. This market index is called

What Is Stock Replenishment?

These two words are usually considered synonymous and interchangeable by most people, but they are not actually the same thing. Here’s why: Stocks, as we mentioned earlier, mean ownership or stake in a company. It’s more

. For example, in the statement “I bought 700 shares of San Miguel Corporation (SMC) Stock” there is a number before the word “stock” that shows the amount of stock I bought, and before the word “stock” the issuing company from which I bought the stock.

There are two kinds of shares: common and preferred. Both stocks represent ownership in a company and both can be investments that you can profit from. This means you can either be a common shareholder or a preferred shareholder (or both!). The main difference between them is their voting rights. Common shareholders have the power to decide who they appoint to the board of directors and have a vote on important matters concerning the future of the company. Preferred shareholders do not have this right. However, when it comes to the distribution of the company’s assets and profits, as the name suggests, they are preferred over ordinary shareholders. This means that they take precedence over dividends when the company is profitable and are also paid ahead of ordinary shareholders when the company is going into liquidation. In fact, preferred stock is similar to bonds in that preferred stockholders are usually guaranteed dividend payments forever. While common shareholders may still receive dividends, it is up to the board of directors to decide whether or not to distribute dividends to shareholders. In the event that a company needs liquidation, it first pays its creditors (or simply the people or institutions it owes money to), then its bondholders, then its preferred stockholders, and finally its common stockholders. This means that the common shareholders will not receive any compensation or money until the preferred shareholders are paid. This is why preferred stock is considered less risky than common stock. Finally, like bonds or fixed income investments, the par value of preferred stock is inversely related to market interest rates. Thus, when market interest rates rise, the par value of the preferred stock falls and vice versa. However, the price of an ordinary share is mainly determined by its demand and supply on the market. The diagram below summarizes the differences between common and preferred stock.

Nevertheless, preferred shares are very attractive to those who prefer more stable and safer stock investments. This is because preferred stock offers its holders a fixed and stable income stream. Its dividend payments are higher compared to common stocks and bond interest payments. In addition, if you are a more conservative investor looking to invest in stocks, preferred stock is an ideal choice for you as you can protect your initial capital as it offers stronger bankruptcy protection than common stock. The issuing company also repays the initial investment when it is held to maturity. On the other hand, common stock is more abundant on the stock market, and while it is riskier than preferred stock, it also offers unlimited potential for higher returns as the issuing company becomes larger and more profitable. What makes common stocks attractive is their ability to increase in value dramatically over time, with increases even exceeding 100% possible.

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In addition to what we discussed above, there are two main categories of stocks you can choose to invest in: Value stocks and Growth stocks. Value stocks are another concept

. What do we mean by undervalued stocks? Undervalued stocks are stocks whose prices are currently trading below their intrinsic or true value or value. These are stocks that are believed to have the potential to grow and generate significant returns in the future. Value stocks are usually large and reputable companies such as household names. These stocks usually pay good dividends as well. Investing in value stocks is called

. Basically, these are companies that generate profits faster than the average company in the same industry would normally do. Companies that carry this kind of characteristic are forward-looking in the sense that they have introduced something innovative and have a strong competitive advantage. Growth stocks typically do not pay dividends to their shareholders, and if they do, the dividends tend to be very small. Investing in growth stocks is the so-called

. (Can’t decide which one is better? This article presents an interesting comparison between growth and value stocks, and this one presents the two in a Philippine context!)

What Tech Investors Should Know About Cloud Stocks

Now you may be wondering how investors make money from stocks, and there are two ways that shareholders – common and preferred – make money. The first is capital appreciation. Capital appreciation occurs when the current value of a share is higher than when it was purchased. Investors profit from this when they are able

. Take investor Steve as an example. Investor Steve bought 100 shares from SMC when the price was Php 2.00 per share. He was able to sell his shares when the price was Php 3.00 per share. In total, he gained Php 100 from the stock through capital appreciation. Second, investors earn through dividends. Dividends represent the distribution of a portion of a company’s profit (or net profit) to its shareholders. Dividends are given to preferred shareholders, while common shareholders can also receive dividends as decided by the board of directors. Some companies announce regular dividend payments to shareholders (ie, annually, semi-annually or quarterly). Going back to the example of investor Steve, Steve also owns shares in JFC and at the time JFC declared cash dividends of Php 0.01 per share, Steve owned 100 shares from JFC so he could receive a total dividend of Php 1.00. In this way, the investor owns from the dividends.

Dividends can be paid either in cash or through shares. Cash dividends are simply dividends paid in the form of cash. However, stock dividends are dividends paid in the form of additional shares. Here, the company issues new shares and distributes them to its existing shareholders. Recipients of stock dividends can choose to keep their new shares or sell them.

There are two main types of people in the stock market: the investor and the trader. Before distinguishing them, let’s first discuss their similarities. The goal of investors and traders is to benefit from stocks and make money from them through market participation. Both buy shares. Investors and traders also never enter the stock market and buy stocks blindly. Both require a plan or strategy to make the best use of your capital. The main reason is that both face the risk of not getting the expected returns within their time frame or even losing their capital in the stock market.

How To Buy Stocks: A Step By Step Guide For Beginners

As you saw from the comparison above, there are different types of traders based on how long they actually hold their investments, which in this case are stocks. We’ll break them down below

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