How to Test Your Stock Market IQ

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Are you curious to make a stock market investment you are still not familiar with the terms and conditions? The stock market news is everywhere is it in the internet, radios or newspapers. However, all your questions may not be answered in these sources.

Stock market IQ
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You must have an in-depth knowledge of how the Stock market works and what you will expect after making your investment. This tutorial shows the most common questions usually asked by the novice investors.

What are the primary indicators of stock market health?

All public incorporations issue their quarterly earnings report to the stock exchange market. Discussed below are the critical data pieces that are used to evaluate stock health.

Earnings per share (EPS)-this is the ratio of the total earnings to the total investor shares. It is used to compare stocks.
Price/ earnings ratio (P/E) - a stock market with a high P/E value indicates that the future is pleasant; you have to put more efforts to maintain that performance. The vice versa is true. You need the correct interpretation of these figures before choosing the company that you will invest your shares in.

Is there enough evidence that you will make profits after buying the stock?

Uncertainties always accompany investments hence you have to risk. However, the doubts can be reduced by seeking professional advice or do enough research to have a slight insight of what might happen in the future.

The market is affected by; natural disasters, political events and consumer emotions that might minimize the returns or increase them.

Will I be getting dividends?

One thing to keep in mind is that not all the companies you come along will pay dividends. Although most of the investors use bonuses as part of their long-term strategies, a high dividend yield does not always favor the investors.

Instead of searching for the companies that have high dividends, you should consider the stock sectors that have room for expansion or those which grow as the economy improves. You will be getting notifications of the dividend amounts you will get depending on the company’s performance.

What is the main difference between ordinary and preferred stock?

Common stocks are the personal interests of a public company owned by shareholders. If the price of the stock rises to a higher level other than the shareholder purchased, he/ she gains. On the other hand, preferred shares are long-term investments.

The preferred stockholders receive their dividend at regular intervals which can either be floating or fixed. However, preferred stockholders do not benefit if the price of the stock does not increase. When the company dissolves, preferred stockholders have the right to distribute the company's assets while the ordinary stockholders do not recoup anything.

What is meant by shorting a stock?

Stocks are said to be short when the current price of the stock is overvalued. During the shorting process, an investor borrows stock from any brokerage company and then sells it to other buyers. When the stock price falls, an investor who has been affected can repay what is owed by the brokerage house.

To have a stock short, you need to trade via a broker using any margin account. Shorting stocks is a very aggressive strategy while making investment decisions since the money lost is replaced immediately to the margin account.

Should you invest in a hedge fund?

Since most of the hedge fund buy financial products which are not SEC regulated, it may be hard to determine the real value of the products to maintain liquidity. Hedge fund investment is not the best choice for novice investors. However, there is an option for those who meet the financial criteria requirement of becoming accredited investors.

What is ETF?

Exchange traded fund (ETF) combine the stock flexibility with the mutual fund low cost. Most of ETF depends on stock indices, unlike the mutual fund. Therefore they have a continually changing price where you can sell or buy from them at any time.

You have to understand your financial objectives because there are many ETFs types to choose from. If you have a small portfolio, the best option for you will be a mutual fund. While if you have vast amounts of money, then ETF will be the perfect choice for you.

Regardless of whether you are an experienced trader or not, you will need to carry out enough research as well as expert consultation to make the best investment choice.

There are plenty of IQ options in EBooks, tutorials, webinars, and videos that provide detailed information about stock market trading. You also need to have the essential understanding of the primary investment tools like the trend lines and Japanese candlesticks.

Follow this link to learn more about the best IQ binary trading patterns.

Author Bio: John Alex is a freelance writer, experienced blogger, and a professional social media coach. Currently, He’s working with Furthermore, John assists in the business creation and control social media content planning.
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