1. What stocks actually are
A stock (or share) is a tiny slice of ownership in a publicly traded company. When you buy one share of Apple, you own a small fraction of the business and are entitled, in proportion, to a piece of its future profits and — when paid out — .
Companies issue shares to raise capital; investors buy them hoping their value grows over time. A share price changes every second during market hours.
2. How prices form
A share price is the meeting point between people who want to buy and people who want to sell. More buyers than sellers → price goes up. The other way around → price goes down.
What moves preferences? Mostly: quarterly results (the ), company or sector news, macro data like rates and inflation, and analyst expectations. matters too — a big move on thin volume is usually less reliable.
3. Fundamental indicators
Fundamentals measure the health of the business behind the ticker. The three most-read:
- — price relative to earnings per share. How many years of current earnings you're paying for, to own the stock.
- — earnings per share. Sustained EPS growth is one of the cleanest signals of corporate health.
- — cash left after running the business and investing in it. More "real" than accounting earnings.
4. Technical indicators
Technical indicators look at the chart, not the business. They frame how the stock is trading right now:
- (50- and 200-day) smooth out the price to reveal the underlying trend. Above both = usually strength.
- — how strongly a stock keeps moving in the same direction. Useful, never a guarantee.
- — how much the price swings. High volatility = big moves in both directions, not necessarily "bad".
5. Diversification and risk
Concentrating a portfolio in one stock or one sector amplifies both gains and losses. — spreading capital across uncorrelated stocks and sectors — statistically reduces overall portfolio without necessarily lowering expected return.
It's often called "the only free lunch in finance": one of the few choices that gives you a benefit without an obvious cost.
6. Biases to watch
The worst investing decisions rarely come from bad analysis — more often, from cognitive biases. Two common ones:
- — holding a losing position "to break even" instead of rationally reassessing it.
- — giving too much weight to the price you bought at. The market doesn't know it: only expected value from here matters.