Some More Things to Consider about Stocks

Stock Indexes

If you watch the news you will constantly hear newscasters screaming hysterically about some strange contraption known as the "Dow".

When they refer to the "Dow" they are referring to the Dow Jones Industrial Average, a stock market index. The point of this index is to represent the state of the stock market as a whole; whether it does so effectively or not is a topic for a completely different article.

The Dow Jones Industrial Average is simply the average of thirty "blue-chip" stocks such as IBM, General Motors, McDonald's and Microsoft. These companies are big, bulky, well-established and are considered to be rather dandy representatives of their sectors.

If the Dow rises in value, it is considered that the economy is doing well; if its value falls, it's considered that the economy is not doing so well.

Other stock market indexes are the S&P500 and the Russell 2000, although the Dow is the index that is most closely followed.

Dividends

Dividends are one of the ways a company distributes its earnings to shareholders. They take the form of cash, stock or even property. The amount of the dividend is determined by the board of directors; the more shares you own, the more dividends you get.

Also, high-growth companies (the kind of companies I like) tend to reinvest their earnings in order to sustain their super growth instead of giving their money away to shareholders, this results in the price per share rising.

Another reason I don't like dividends is due to tax reasons. Just remember: you have to pay tax on dividends and paying tax means you make less money.

Different Types of Stock

There are also different types of stocks. The ones that I constantly refer to are "common stock" and is the type that most people refer to when they are discussing stocks.

There is also "Preferred Stock" as well as different classes of stock, such as "Class A" and "Class B". I'd tell you more about these types of stocks...but there's no point. Stick to common stock, that's where the money is.

Different Types of Markets

When everything is fine and dandy and stock prices are rising in price while everyone is making money - it is referred to as a "Bull Market".

When people are stockpiling food reserves, selling their kidneys to black market organ dealers, haggling their kids away for pocket change and when stock prices are falling - it is considered a "Bear Market".

So now when you hear people using these terms, you won't feel all that helpless anymore...maybe even on their level...or better yet, more powerful...powerful enough to crush their skulls into dust...and to conquer the world...with a flick of your finger.

Yes, the stock market can do that for you.