Investing requires a comprehensive understanding of the financial market, a company's business model, and much research.
Conduct your own due diligence before making any investment decisions.This is no investment advice. It is simply a collection of my findings.
The Stock Market is a marketplace where financial instruments, primarily stocks, are bought and sold. It plays a critical role in the health of the economy and provides individuals with the opportunity to invest and grow their wealth.
The owner of a Trading Plattform is usually referred to as a Broker. Most Brokers operate online nowadays. You can Open an account which is simmilar to a bank account. On this Account, you can transfer money.
Attached to the Account is a portfolio which holds your Purchased Assets. When buying or selling shares, the money of the account is in use.
In Switzerland, I use the Plattform Swissquote.
Financial instruments traded in the stock market vary in complexity and risk. Below are some common types you might encounter:
Shares represent partial ownership of a company. By owning shares, you participate in the company's earnings as well as its losses. You may also be entitled to dividend payments.
In general, there are two types of shares:
Generally speaking, when a company performs well, its shares go up in price. When it doesn't perform well, its shares go down in price.
Bonds are similar to loans for companies and governments. Usually, you purchase a bond that is being paid back on a schedule, with some additional interest added in fixed amounts.
Bonds have counterintuitive pricing behavior. A bond can be purchased and sold on the market after the initial offering.
If new bonds are issued with a higher interest rate, the old bonds will fall in price because they do not yield as much return, making them less attractive to buyers. Conversely, if interest rates fall, the old bonds will rise in price because they offer higher interest rates, making them more attractive to buyers.
Cryptocurrencies are digital or virtual currencies that use cryptography for security. They operate independently of a central authority.
For more in-depth information on these instruments, navigate to their respective sub-pages
Mutual Funds are pools of assets managed by professionals. They provide diversification across a range of investments. By owning shares in a mutual fund, you're investing in the fund's entire portfolio.
ETFs are similar to mutual funds but are traded on stock exchanges. They usually track an index or a commodity and are more liquid than mutual funds.
Derivatives can be especially risky instruments.
Handle with great care!
Options are financial contracts that offer the right but not the obligation to buy or sell an asset at a predetermined price within a specified timeframe.
If the price does not reach the predefined threshold, it is deemed worthless because the option buyer could as well trade the asset on the Stock market for a better price.
Usually, an option contract is for 100 shares. Thus, the price of an option should be multiplied by 100. The option price is a premium paid to the option seller, who takes on the risk since future price movements are unpredictable.
Futures contracts are agreements to buy or sell a specific asset at a future date at a predetermined price. They can be traded on exchanges and are commonly used for hedging.
Derivatives are financial contracts whose value is derived from an underlying asset. They are often used for hedging and speculative purposes.
Fundamental Analysis is a methodology for evaluating and valuing a company by examining its financial statements, management, industry position, and other intrinsic factors. The goal is to understand the true value of a company, separate from its current market price, to make better investment decisions.
The Balance Sheet provides a snapshot of a company's financial position at a specific point in time. It is divided into three main sections: assets, liabilities, and shareholders' equity.
Assets: These include everything the company owns, such as buildings, equipment, and inventory.
Liabilities: These represent the company's debts and obligations.
Shareholders' Equity: This is what would be left if all assets were sold and all liabilities were paid.
Liquidity: Current Ratio = Current Assets / Current Liabilities
Solvency: Debt-to-Equity Ratio = Total Debt / Shareholders' Equity
Profit Retention: Retained Earnings = Total Earnings - Dividends Paid
Asset Efficiency: Return on Assets (ROA) = Net Income / Total Assets
The Income Statement outlines a company's revenues, costs, and expenses over a period, commonly a fiscal quarter or year. This statement provides an overview of how much money the company is making or losing during a given time frame. Key metrics from the Income Statement often include Gross Profit, Operating Income, and Net Income.
The Cash Flow Statement details the cash inflows and outflows from three main activities: operating, investing, and financing. Operating activities include the day-to-day running of the business. Investing activities include buying and selling assets like equipment or investments. Financing activities involve transactions with the company’s owners or creditors, such as issuing stock or paying down debt.
Investors look at future revenue and earnings projections, the company's position within its industry, and the overall market and economic conditions.
Assessing the competency of the management team can offer insights into a company's long-term viability and growth potential.
By combining all these factors, investors use fundamental analysis to determine a company's intrinsic value and whether it is overvalued or undervalued in the current market.
For more information, explore the sub-pages dedicated to specific topics within the stock market.