General Stock Market Investment Strategies- A Key to Success

FREQUENT GENERALS

1) Board of Directors: A group of individuals that are elected as, or elected to act as, representatives of the stockholders to establish corporate management related policies and to make decisions on major company issues. Such issues include the hiring/firing of executives, dividend policies, options policies and executive compensation. Every public company must have a Board of Directors.

2) Dividends: Distribution of a portion of a company’s earnings, decided by the board of directors, to a class of its shareholders. The dividend is most often quoted in terms of the rupees amount each share receives (i.e. dividends per share or DPS). It can also be quoted in terms of a percent of the current market price, referred to as dividend yield. Most secure and stable companies offer dividends to their stockholders.

3) Growth Stock: A stock that experiences a continued period of growth exceeding that of the economy. Generally, the duration is over a year in length.

4) Speculative Stock: Stocks that offer the potential for substantial price appreciation, usually because of some special situation such as new management or the introduction of a promising new product.

5) Large-cap stocks: are large-sized companies, generally with market values of more than $ 1 billion.

6) Mid-cap stocks: are medium-sized companies, generally with market values of less than $ 4-$ 5 billion but more than $ 1 billion.

7) Small-cap stocks: are stocks that generally have market values of less than $ 1 billion but can offer above-average returns.

8) Par Value: A dollar amount that is assigned to a security when representing the value contributed for each share in cash or goods.
9) Book Value: the value of the equity of the firm divided by the number of shares outstanding.

10) Liquidation Value: the value obtained for selling all the assets of the corporation on the auction block.

11) Market Value: the current market price of the stock times the number of shares outstanding.

12) Investment (Intrinsic) Value: the value of the corporation based on discounted cash flow analysis and the income generating capacity of the firm.

STOCK MARKETS-TYPES

1) The Bull Market is when everything in the economy is great, people are finding jobs, gross domestic product (GDP) is growing, and stocks are rising. Bull markets cannot last forever though, and sometimes they can lead to dangerous situations if stocks become overvalued. If a person is optimistic and believes that stocks will go up, he or she is called a “bull” and is said to have a “bullish outlook”.

2) Bear Market characterize the attitude of investors who believes that a particular security or market is headed downward. Bears attempt to profit from a decline in prices. Bears are generally pessimistic about the state of a given market. Bearish sentiment can be applied to all types of markets including commodity markets, stock markets and the bond market.