Intro. to the Stock Market

• What exactly is a stock and why do companies sell stock in the first place?

Stock typically takes the form of shares of common stock. As a unit of ownership, common stock typically carries voting rights that can be exercised in corporate decisions. Preferred stock differs from common stock in that it typically does not carry voting rights but is legally entitled to receive a certain level of dividend payments before any dividends can be issued to other shareholders. ^{[1] [2]} Convertible preferred stock is preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a predetermined date. Shares of such stock are called "convertible preferred shares" (or "convertible preference shares" in the United Kingdom).
Although there is a great deal of commonality between the stocks of different companies, each new equity issue can have legal clauses attached to it that make it dynamically different from the more general cases. Some shares of common stock may be issued without the typical voting rights being included, for instance, or some shares may have special rights unique to them and issued only to certain parties. These case by case variations in the specific form of stock issuance is beyond the scope of this article, except to note that not all equity shares are the same.

• What is the difference between a public and a private company?

Usually, the securities of a public company are owned by many investors while the shares of a private company are owned by relatively few shareholders.

• What is the Dow Jones Industrial Average?

The Dow Jones Industrial Average is one of several stock market indices created by nineteenth century Wall Street Journal editor and Dow Jones & Company co-founder Charles Dow. Dow compiled the index as a way to gauge the performance of the industrial component of America's stock markets. It is the oldest continuing U.S. market index, aside from the Dow Jones Transportation Average, which Dow also created. Dow was inspired by Charlie Lowrys previous work

Today, the averages consists of 30 of the largest and most widely held public companies in the United States. The "industrial" portion of the name is largely historical—many of the 30 modern components have little to do with heavy industry. To compensate for the effects of stock splits and other adjustments, it is currently a scaled average, not the actual average of the prices of its component stocks—the sum of the component prices is divided by a divisor, which changes whenever one of the component stocks has a stock split or stock dividend, to generate the value of the index.

• What is a blue chip stock?

A "blue chip" is the nickname for a stock that is thought to be safe, in excellent financial shape and firmly entrenched as a leader in its field. Blue chips generally pay dividends and are favorably regarded by investors. A few examples of blue chips are Wal-Mart, Coca-Cola, Gillette, Berkshire Hathaway and Exxon-Mobile.

• What is the New York Stock Exchange and the NASDAQ?

The New York Stock Exchange (NYSE), nicknamed the "Big Board," is a New York City-based stock exchange. It is the largest stock exchange in the world by dollar volume and, with 2,764 listed securities^[1], has the second most securities of all stock exchanges. Its share volume was exceeded by that of NASDAQ during the 1990s. It was considered the second biggest stock exchange in the world in terms of company listings only next to NASDAQ with 3,200 companies, before Bombay Stock Exchange (BSE) of India, consolidated this position as the biggest stock exchange in the world with a company listing of 4,800 as of August 2007.^[2]Tokyo Stock Exchange and London Stock Exchange. As of December 31, 2006, the combined capitalization of all New York Stock Exchange listed companies was $25.0 trillion. ^[3] Nonetheless, the NYSE constitutes the most crucial financial hub of the world, along with

The NYSE is operated by NYSE Euronext, which was formed by the NYSE's merger with the fully electronic stock exchange Archipelago Holdings and Euronext. The New York Stock Exchange trading floor is located at 11 Wall Street, and is composed of four rooms used for the facilitation of trading. A fifth trading room, located at 30 Broad Street, was closed in February 2007. The main building, located at 18 Broad Street between the corners of Wall Street and Exchange Place, was designated a National Historic Landmark in 1978.^[4]

NYSE Group merged with Euronext, and many of its operations (particularly IT and the trading platform) will be combined with that of the New York Stock Exchange and NYSE Arca.

• What is a mutual fund?

A mutual fund is a professionally-managed form of collective investments that pools money from many investors and invests it in stocks, bonds, short-term money market instruments, and/or other securities.^[1] In a mutual fund, the fund manager, who is also known as the portfolio manager, trades the fund's underlying securities, realizing capital gains or losses, and collects the dividend or interest income. The investment proceeds are then passed along to the individual investors. The value of a share of the mutual fund, known as the net asset value per share (NAV), is calculated daily based on the total value of the fund divided by the number of shares currently issued and outstanding.

• What are some of the biggest companies on the stock market, how much is their stock?
• What is the PE ratio of a stock?

A price earnings ratio (PE) is calculated by dividing the market price per share by the current or a projected annual earnings per share. It measures the market's expectations regarding earnings growth potential and risk.

• What is a stock dividend?

stock dividend (n.) A dividend paid to stockholders in shares of stock, often used in place of or in addition to a dividend paid in cash.

• Links to help you:
• StocksQuest (go to "stock guide" and then "basics".)
• How stuff works: stock market