Owning Stocks

Key Takeaways

• A stock's value is based on the corporation's ability to create and grow profits.
• Earnings expectations are based on economic, industry, and company-specific factors.
• The size of the market capitalization affects stock value.
• A stock's market popularity or perception of value affects its value.

• Stocks can be characterized by their expected behavior relative to the market as

  • growth stocks,
  • value stocks,
  • cyclical stocks,
  • defensive stocks, or
  • other named types (e.g., blue chip stocks, penny stocks).