10 Things You Should Know About Stocks

10 Things You Should Know About Stocks

We have brought together the most frequently asked questions and answers about stocks. Find out what you need to know and wonder about stocks.

Admittedly, the situation can seem a little scary when it comes to the stock market and stocks in investing. Because all those numbers, charts, jargon and abbreviations are enough to turn anyone’s head. However, understanding the functioning of the stock market and stocks is not as difficult as it seems.

Here you can find the most frequently asked questions and answers about stocks. So you can learn the basics or refresh your knowledge.

Ingredients
1. What Does It Mean to Take a Company Public?
2. How Is It Determined How Many Shares A Company Will Sell?
3. Who Determines How Much the Unit Price of a Share Will Be During a Company’s Public Offering?
4. How Do I Know If It Will Be Profitable To Buy A Stock?
5. Why Is the Stock Market Fluctuating Wildly Every Day?
6. So How Can We Distinguish between an Ordinary Market Fluctuation and a Real Problem?
7. How Do I Calculate How Long I Need to Hold a Share?
8. What are Dividend Payments and Why Do Some Companies Distribute Dividend Payments While Others Do Not?
9. Why Do Some Companies Buy Back Their Stocks and How Will This Affect My Stocks?
10. Why Should We Enter Mutual Funds Instead of Collecting Shares One by One?

1. What Does It Mean to Take a Company Public?

An IPO is one of the ways a company that is making growth plans raises funds. In the process of public offering, also known as IPO (Initial Public Offering), the company opens its shares to the public through the stock market. The new shareholders buy a certain portion of the company, and in the process (hopefully) the company also raises the money it needs to grow.

2. How Is It Determined How Many Shares A Company Will Sell?
The company in question determines the material value of the company by making an agreement with an investment bank before the public offering takes place. In order to determine the material value of a company, many “shape” calculation techniques are used, such as past and planned earnings, profit-loss ratios, products planned to be developed and how much the marketing department can increase the interest in the company, the material value of similar companies.

After the valuation process is over, the bank makes a recommendation to the company on how many units of stock it should sell. Upon this recommendation, the board of directors makes its final decision. Owners often do not sell half of the shares, but keep them in order to retain control of the company.

3. Who Determines How Much the Unit Price of a Share Will Be During a Company’s Public Offering?
You determine it, so at least in some way. The contractor (ie the investment bank) may calculate a base selling price based on the quantity of units it recommends to be sold. But part of this pricing process is the interest in the company’s public offering.

If the interest in the company is high, the base price will be high. Conversely, if the interest in the company is low, the price will be low.

4. How Do I Know If It Will Be Profitable To Buy A Stock?
For most people, buying individual stocks is not a good idea. In this regard, people generally take into account the advice of friends, that the stocks are “selling like cheese and bread” or what is happening in the market right now, which is the opposite of what should be done for a healthy investment; What you need to do is act rationally, not emotionally.

If you are ready to invest in individual shares and are sufficiently aware of the risks, you can examine the status of companies online through platforms such as Bigpara, Mynet Finans, Yahoo Finance and Bloomberg. It’s also good to look at the price-earnings ratio of companies; If the P/E ratio is low, the shares are being sold relatively cheap when compared to the 52-week rises and falls of the current price and forward earnings. You can also take a look at the reports of market analysts. The ability of a company to pay dividends to its investors is also a sign that it is financially healthy.

A little too cumbersome, isn’t it? But basically it’s enough to look at three simple things. Because what we call shares is actually a small part of the company’s existence. There are three things to look for when buying shares; What does the company sell? Does what he sells make a profit? Who runs the company? That’s all. If you want to learn more, you can refer to the article How to research a stock.

5. Why Is the Stock Market Fluctuating Wildly Every Day?
Fluctuations are normal. Everything from oil prices to the economic situation of China or the United States, or even the weather on that day, can affect these fluctuations. The best thing you can do as an investor is to ignore these fluctuations and focus on the long term and the big picture.

6. So How Can We Distinguish between an Ordinary Market Fluctuation and a Real Problem?
By evaluating the performance of the stock against an appropriate criterion. For example, in case of a decline in the main stock market index, it is quite normal for the shares of a large-scale company you invest in to fall.

However, if your stock has fallen by 5-10% more than the benchmark, you should seriously consider whether to hold this stock or not. For example, if the main stock index is down 10% and your big company stock is down 11%, you may need to take that stock into consideration.

But that doesn’t mean you have to sell your stock. Because when you start investing, you should not act according to daily fluctuations. If you are going to enter stock investing, you should do it long-term and act accordingly.

7. How Do I Calculate How Long I Need to Hold a Share?
The ideal answer to this question is: whenever you need money. Because, in general, the value of the stock has nothing to do with this issue.

Even if you are afraid of losing your investment, it is okay to go back to the beginning. The decision process for selling shares is the same as for buying shares. It should be checked whether the company makes a profit and whether it is handed over to good managers. If the situation is still as satisfactory as when you bought the stock, there is no need to dispose of the stock.

In fact, if the prices are decreasing, it is beneficial to invest more in that company.

8. What are Dividend Payments and Why Do Some Companies Distribute Dividend Payments While Others Do Not?
Dividend payments (aka dividends) are the money companies pay out of the company’s profits to certain shareholders. Companies that regularly pay dividends are large, stable companies, and rich enough to do so. In fact, the fact that a company can regularly pay dividends enables that company to attract more investors.

Of course, this does not mean that companies that do not pay dividends are always financially weak. Instead of distributing dividends, the company may decide to expand the company or reinvest the money in another way. That’s why companies that aim for rapid growth, like many of the startups, do not usually distribute dividends.

9. Why Do Some Companies Buy Back Their Stocks and How Will This Affect My Stocks?
Buyback, like paying dividends, distributes wealth and distributes the remaining excess money to shareholders. How good are these companies, right? This is only one side of the business. Buybacks are not simply an act of generosity.

This move will cause the unit price of the company’s shares to increase as fewer shares will remain in the market. So, at best, a company thinks its shares are under-sold and does something like this to increase its share prices. On the other hand, this move can also be used to make the company’s stock values ​​look more valuable than they actually are.

10. Why Should We Enter Mutual Funds Instead of Collecting Shares One by One?
Individual equity investing is too risky and does not provide diversification, which is doable but increases costs. Also, if you invest all of your money in one stock, you could lose huge amounts of money when that stock goes down (unless they’re still bullish when it’s time to sell the stock). In addition, examining the companies one by one and finding the ones to invest in is a job that requires serious overtime.

When you invest in a mutual fund, fund managers do all the work for you. They bring together hundreds of different stocks and offer you a wide range of investments. If you want to learn more about mutual funds and how you can invest in stocks through the funds, the mutual funds guide will help you.

Source: https://konupara.com/

 

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