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Stocks

Stocks represent ownership equity in a firm and give rights to the shareholders to make decisions on actions within the company. Shareholders earn money on corporate earnings through capital gains and/or dividends. 

Share prices are set by the supply and demand that investors buy and sell(make orders).

Listing on exchanges helps companies get funding and the ability to get capital. This could also mean a raise in costs and an increase in regulations.

What is a stock?

A stock is a financial instrument that represents ownership in a company or corporation and a claim in the company's assets and earnings. 

Owning stock in a company or corporation means that a shareholder owns a part of the company equal to the number of shares held as a proportion of the company's total outstanding shares. 

What does this mean?

To put it into very easy terms; There are 10 slices of pie. You own 1 slice of the pie. You own 10% of the pie. The number of outstanding shares would be 10 slices. But, for real stocks, there would typically be well more than just ten outstanding shares. There could be 10 million, 100 million, or even 1 billion outstanding shares of this company's stock. 

In the sense of how the market would work:

If a share price of a stock is $100, and one day it goes to $110. The stock had gone up by $10. Because the share price is $100, and it had gone up by $10 dollars, then the stock had RISEN by 10%. 

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Now, depending on the number of shares you have, the gain will be different. The percent change will not change if the number of shares s different. 

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Dividends

Dividends are very important because they allow another source of income for investors. Stocks will sometimes have dividends to reward their shareholders for investing in their stock. These dividends are paid out quarterly, and they are a percentage of the total value owned in the company's stock.

Stock sheet of AAPL on Google

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Lumen Technologies

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Diversification

It is essential to diversify your portfolio with different stocks like Apple, Microsoft, and many other big-name companies. But, is also very essential to have different sectors achieved while investing in stocks; healthcare, materials, real estate, consumer staples, consumer discretionary, utilities, energy, industrials, consumer services, financials, and technology. This is very important because stocks within a sector tend to follow its competition companies within that sector. For example, if some news is announced about tech, Apple, Microsoft, and many other Tech companies stock prices will fluctuate with this news. So, it is much safer to have it spread out within different sectors. 40 stocks are typically said to be a diverse STOCK portfolio.  It is also very important to not only have large-cap stocks. (1)

(1)What does this mean?

Very well-known companies like Apple, Amazon, Meta, and Microsoft shouldn't be the only stocks in your portfolio. (2) It is essential to have mid-cap(3) and small-cap stocks(4) within your portfolio.

(2) These companies have market caps of over $200 billion, therefore they are considered to be Mega-cap companies.

(3) Mid-cap companies are companies with Market Caps between $2 billion and $10 billion.

(4) Small-cap companies have a market cap between $300 million and $2 billion. 

Don't put all of your eggs in one basket, because if something happens to the basket, you may lose eggs. Think of it like this; eggs are money, baskets are stocks, and wagons are sectors. So if you have your eggs spread between different baskets, which are then spread between different wagons, there is a smaller risk of losing eggs/eggs breaking. This is a simple way on how to have a safer lower-risk portfolio.

Mega-cap

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Large-cap

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Mid-cap

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Small-cap

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