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Stock / ETF 101
About stockStocks are issued by the public company. The basic unit of stock is a share. It represents a ownership of the company. For example, When you bought a share of stocks, you are a share holder of the company that own a part of the company.
Types of stockCompany can issues different classes of stocks base on their needs. The two main forms of stock are Common and Preferred.
Common stock - When we talks about stock we usually referring this type of stock. As a shareholder of common stock, you have right to vote at shareholders' meetings and to receive dividends, as well as a claim on part of its assets and earnings along with the shares.
Preferred Stock - It has a higher claim on the assets and earnings than common stock. Its shareholder usually guaranteed a fixed dividend payment as well as has priority in the event that a company is liquidated. Preferred shares usually do not have voting rights.
Price of stockThere are many factor influence stock price. Generally speaking, stock price change based on company's earning and market participant's feeling(sentiment). Over the long term, company's earning are behind the stock price movement. For example, when company made profits, investor bid up stock price, and vice versa.
In the short run, stock price are affected by emotion, news, rumors, and so forth. For example, when trader has positive feeling for a stock, he/she inflate it with bullish sentiment. thus, stock price will soar. Conversely, if trader has negative feeling for a stock, he/she fill it with bearish sentiment, eventually, we will see lower stock price.
Home of stocksCompany sell shares to public stock market by listing on exchanges. The exchanges connect buyer and seller through computer or telecommunication network. Nowadays, most exchanges in the world are operating electronically, thus everyone can easily trade stock in front of his/her own computer. Most U. S. company and some foreign company are listed three major us stock exchanges: NYSE Euronext, NASDAQ and AMEX. They are home to us traded stocks. You can find stocks info at their websites.
About ETF
ETF stands for Exchange Traded Fund, it is a string of securities that tracks an index, a sector or a commodity. it has advantages of stocks and mutual funds combined but trade like stock, such as, the ability to sell short, buy on margin and purchase as little as one share, even can be traded on intraday, etc.
Why ETFETF offer a wide range of investment opportunities. The manifest benefits of ETFs are:
- Diversify Sector or market exposure
- All day tracking and trading like single stock
- Track a index or sector through a single execution
- Can be sold short to hedge long stock position, and vice versa.
- Lower expense ratios than other investment products
Home of ETFsMost u.s. traded ETFs are list on AMEX - the origin of exchange traded funds (ETFs). Since AMEX created Standard & Poor's Depositary Receipt (SPDR) in 1993, exchange traded funds have been developed into ample investment category in various market and industry sector.
The popular ETFs:
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