Senin, 23 Februari 2015

Your 401(k) Will Be Fine Even Though Stocks Just Tanked

Until yesterday, Russia was believed to be isolated and under immense economic pressures from both the U.S. and Europe over what has been labeled 'aggressions against Ukraine'.  Market cap is determined by the following %link% formula: Number of Shares Outstanding x Price per share.  The market cap is used to classify the size of the company into one of the following categories: nano, micro, small, mid, large, and mega caps.

The nano cap could be compared to a small maple tree that is violently blown around in storms (market crashes) and could be easily uprooted (bankruptcy).  Basically, when investing, look at the market cap or size classification to find something that matches your risk tolerance.

Using beta is much less complicated than calculating it. If a stock has beta of 1.0 it moves in congruence with the market.  This means if the S&P 500 goes up 1% in a day, the stock should go up 1% in a day.  Pfizer is usually a 0.8 beta; meaning if the market goes up 1% it will only increase 0.8%. Casinos usually have the highest betas.  Theoretically, an investor could make the quickest, and most significant gains with a high beta stock, but could lose the most as well if the market underperformed.  Dividends are cash paid per share by companies to reward their shareholders for holding their stock.

When researching a stock on a financial website, there is typically a link for options chains.  They are often listed in T” shaped boxes with call options (the right to buy the stock) on the left and put options (the right to sell the stock) on the right.  The strike prices are listed %link% down the center of the T”. These prices give a range in which the stock is expected to move.  The people in the open interest column on the left are bullish; they think the stock price is going up. The people in the column on the right are bearish; they think the price is going down.

This shows that more people want to buy the stock in the future than sell it. It is worth getting a second opinion, or in this case, thousands of opinions when purchasing a stock. The New York Stock Exchange , which opened in 1792, is the oldest and largest exchange in North America.  Dating back to 1971, the NASDAQ is not a centralized exchange and has no physical trading floor.

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