Investing in the stock market is a good way to meet which of the following savings goals?
A. A vacation next summer
B. A new car in 3 years
C. College in 15 years
D. A down payment on a house in 4 years
Everything you need to know about investing in stocks.
In Lesson 5
Sivy 70: America's Best Stocks glossary
Glossary take the test
Top things to know
What is a stock?
Different kinds of stocks
How much should you pay?
Picking [ stocks for your portfolio
How to buy stocks
Money 101 Lessons
Making a budget
Basics of banking and saving
Investing in stocks
Investing in mutual funds
Investing in bonds
Buying a home
Employee stock options
Saving for college
Kids and money
Planning for retirement
Hiring financial help
Buying a car
1. Stocks aren't just pieces of paper.
When you buy a share of stock, you are taking a share of ownership in a company. Collectively, the company is owned by all the shareholders, and each share represents a claim on assets and earnings.
2. There are many different kinds of stocks.
The most common ways to divide the market are by company size (measured by market capitalization), sector, and types of growth patterns. Investors may talk about large-cap vs. small-cap stocks, energy vs. technology stocks, or growth vs. value stocks, for example.
3. Stock prices track earnings.
Over the short term, the behavior of the market is based on enthusiasm, fear, rumors and news. Over the long term, though, it is mainly company earnings that determine whether a stock's price will go up, down or sideways.
4. Stocks are your best shot for getting a return over and above the pace of inflation.
Since the end of World War II, through many ups and downs, the average large stock has returned close to 10% a year - well ahead of inflation, and the return of bonds, real estate and other savings vehicles. As a result, stocks are the best way to save money for long-term goals like retirement.
5. Individual stocks are not the market.
A good stock may go up even when the market is going down, while a stinker can go down even when the market is booming. ]
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