Understanding the Stock Market Basics

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Stock market definition

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Marketplace for buying and selling shares of public companies.

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Common stock description

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Represents ownership in a company and a claim on its profits.

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Primary purpose of a stock market index

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Measure performance of a specific group of stocks

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Example of a stock market index:

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NASDAQ

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Distinction between preferred and common stock

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Preferred stockholders receive dividends before common stockholders.

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Characteristic of a bull market:

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Rising stock prices

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Dow Jones Industrial Average (DJIA)

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Tracks 30 significant publicly traded U.S. companies.

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Type of stock with higher volatility:

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Penny stocks

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Market capitalization refers to:

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Total value of a company's outstanding shares.

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Characteristic of a bear market:

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Decreasing stock prices