Introduction to the Stock Market

1) What exactly is a stock and why do companies sell stock in the first place?

A stock is a certificate that shows you own a very small fraction of a corporation. If the company makes a lot of money, you do as well. Stocks also show that you have voting power within the company, the more stocks you own from one company, the more voting power you have on decision making.

2) What is the difference between a public and a private company?

A private company only allows a select group of people to purchase a stock, while a public company allows anybody to purchase a stock.

3) What is the Dow Jones Industrial Average?

It is an indicator that averages 65 stocks in 3 different categories, in order to evaluate how the market as a whole, is doing.

4) What is a blue chip stock?

A blue chip stock is the most valuable stock you can buy.

5) What is the New York Stock Exchange and the NASDAQ?

The New York Stock Exchange is a New York City based stock exchange. It's currently the largest Stock Exchange in the world. NASDAQ (National Association of Securities Dealers Automated Quotations) is a stock exchange for all of America. It is the largest electronic screen based market in the United States.

6) What is a mutual fund?

A mutual fund is a group investment. When a lot of people together pool their money into investments. There is usually a Fund Manager or "Portfolio Manager".

7) What are some of the biggest companies on the stock market, how much is their stock?


Chevron - $207.2 billion
Toyota Motor - $205.5 billion
Bank of America - $122.6 billion

8) What is the PE ratio of a stock?

PE ratio is a price-to-earnings ratio. It is a measure of the price paid for a share according to the money earned by the company per share.

9) What is a stock dividend?

A stock dividend is a payment by the company to it's shareholders.