what is this stock market?? market capitalization.
A company's worth, or its total value, is called its market capitalization, or "market cap", and it is represented by the company's stock price multiplied by the number of shares outstanding.
For example, if Microsoft (MSFT) is trading for $71.41, on a particular day, and has 7.7 billion shares outstanding, the company is valued at $71.14 x 7.7 billion = $ 550 billion. If we take this one step further, we can see that Facebook (FB) that has a $167.40 stock price and 2.37 billion shares outstanding (market cap = $396.7 billion) is worth less than a company with a $71.41 stock price and 7.7 billion shares outstanding (market cap = $550 billion). Thus, the stock price is a relative and proportional value of a company's worth and only represents percentage changes in market cap at any given point in time. Any percentage changes in a stock price will result in an equal percentage change in a company's value. This is the reason why investors are so concerned with stock prices and any changes that may occur since a $0.10 drop in a stock can result in a $100,000 loss for shareholders with one million shares.
For example, if Microsoft (MSFT) is trading for $71.41, on a particular day, and has 7.7 billion shares outstanding, the company is valued at $71.14 x 7.7 billion = $ 550 billion. If we take this one step further, we can see that Facebook (FB) that has a $167.40 stock price and 2.37 billion shares outstanding (market cap = $396.7 billion) is worth less than a company with a $71.41 stock price and 7.7 billion shares outstanding (market cap = $550 billion). Thus, the stock price is a relative and proportional value of a company's worth and only represents percentage changes in market cap at any given point in time. Any percentage changes in a stock price will result in an equal percentage change in a company's value. This is the reason why investors are so concerned with stock prices and any changes that may occur since a $0.10 drop in a stock can result in a $100,000 loss for shareholders with one million shares.
Definition of 'Dividend'
Definition: Dividend refers to a reward, cash or otherwise, that a company gives to its shareholders. Dividends can be issued in various forms, such as cash payment, stocks or any other form. A company’s dividend is decided by its board of directors and it requires the shareholders’ approval. However, it is not obligatory for a company to pay dividend. Dividend is usually a part of the profit that the company shares with its shareholders.
Description: After paying its creditors, a company can use part or whole of the residual profits to reward its shareholders as dividends. However, when firms face cash shortage or when it needs cash for reinvestments, it can also skip paying dividends. When a company announces dividend, it also fixes a record date and all shareholders who are registered as of that date become eligible to get dividend payout in proportion to their shareholding. The company usually mails the cheques to shareholders within in a week or so. Stocks are normally bought or sold with dividend until two business days ahead of the record date and then they turn ex-dividend. A recent study found that dividend-paying firms in India fell from 24 per cent in 2001 to almost 16 per cent in 2009 before rising to 19 per cent in 2010.
In the US, some of the companies like Sun Microsystems, Cisco and Oracle do not pay dividends and reinvest their total profit in the business itself. Dividend payment usually does not affect the fundamental value of a company’s share price. Companies with high growth rate and at an early stage of their ventures rarely pay dividends as they prefer to reinvest most of their profit to help sustain the higher growth and expansion. On the other hand, established companies try to offer regular dividends to reward loyal investors.
Description: After paying its creditors, a company can use part or whole of the residual profits to reward its shareholders as dividends. However, when firms face cash shortage or when it needs cash for reinvestments, it can also skip paying dividends. When a company announces dividend, it also fixes a record date and all shareholders who are registered as of that date become eligible to get dividend payout in proportion to their shareholding. The company usually mails the cheques to shareholders within in a week or so. Stocks are normally bought or sold with dividend until two business days ahead of the record date and then they turn ex-dividend. A recent study found that dividend-paying firms in India fell from 24 per cent in 2001 to almost 16 per cent in 2009 before rising to 19 per cent in 2010.
In the US, some of the companies like Sun Microsystems, Cisco and Oracle do not pay dividends and reinvest their total profit in the business itself. Dividend payment usually does not affect the fundamental value of a company’s share price. Companies with high growth rate and at an early stage of their ventures rarely pay dividends as they prefer to reinvest most of their profit to help sustain the higher growth and expansion. On the other hand, established companies try to offer regular dividends to reward loyal investors.
What is 'Active Trading'
Actice trading is the buying and selling of securities with the intent of holding them for a short duration, usually no longer than one day. Active trading as an investment strategy seeks to take advantage of short-term price movements with a focus on highly liquid markets like stocks, currencies, options, and derivatives. Active trading is considered one of the most speculative trading strategies.
Active trading is the buying and selling of securities within days or weeks to capitalize on short-term price movements. In general, active traders use various forms of technical analysis to identify buy and sell signals, as well as set stop-loss and take-profit points.
Active trading shouldn’t be confused with active investing, which involves picking stocks for long-term portfolios based on fundamental analysis. In contrast, active traders focus exclusively on finding short-term trades using technical analysis.
The primary benefit of active trading is that it generates a consistent income with greater upside potential than long-term passive investing. In fact, most active traders use leverage to amplify their capital and enhance the earning potential of their positions. Traders may also specialize in specific assets, such as stock options or futures.
The primary drawback is that academic studies conducted by Terrance Odean and Brad Barber found a positive correlation between trading activity and negative returns. In other words, the researchers found that those trading more often tended to generate worse returns. High frequency trading has also made it difficult for active traders to compete in some markets.
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