The stock market, also known as the equity market or capital markets, is a platform where companies raise capital by issuing stocks to the public. It allows individuals and institutions to invest in companies, potentially earning returns through dividends, interest, or capital appreciation.
There are three main types of stocks: Common Stock, Preferred Stock, and Growth Stocks. Common Stock represents ownership in a company and gives shareholders voting rights. Preferred Stock has a higher claim on assets and dividends than Common Stock. Growth Stocks typically offer high returns but come with higher risks.
Effective investment strategies include Diversification, Dollar-Cost Averaging, and Rebalancing. Diversification involves spreading investments across various asset classes to minimize risk. Dollar-Cost Averaging involves investing a fixed amount of money at regular intervals, regardless of market conditions. Rebalancing involves periodically reviewing and adjusting investment portfolios to maintain an optimal asset allocation.