Global Market post will have to wait, before we go deep into the investment world, we need to put one foot in. This blog post isn't putting your foot in but your toe in! Baby steps.
If you missed my last post -- Click Here
My friend said it's a diary post -- I don't agree, but I don't disagree either.
Prices of Stocks Aren't Always Important
This post is one of the most important posts I've made so far and it will likely stay that way for the rest of this blogs lifespan.
Please read this post 20 times so you can memorize it.
Amateur investors don't understand what the price of a stock means. When you see Amazon selling for $700 a share and Apple selling for $95 a share. People think Amazon is more expensive than Apple. To purchase 1 share, yes you are correct. But Amazon's market cap is $333 billion while Apple's market cap[italization] is $514 billion.
When a stock is expensive, it's because the market cap is far to high to justify the investment. Yes, to a certain extent, the price is important -- but the number of outstanding shares are important too. Also, companies do stock splits. Apple did a split in May 2014 -- if it didn't do that split, the stock would be about $700 a share.
Market Capitalization
Market capitalization is the total dollar market value of all of a company's outstanding shares. The formula for market capitalization is calculated by multiplying a company's outstanding shares by the current market price of one share.
Simple right?
So where do you find the number of outstanding shares? Well, there are many ways, but for amateurs -- Yahoo! Finance is the golden egg.
So .... I think the best way to explain this is with pictures. Oh boy, a picture post!
That Was Easy!
Wasn't that easy? Now all you have to do is multiply 471.83 million shares by the current market price of the stock. As of this writing, the market price of Amazon is at about $705.
Market Cap = Outstanding Shares * Market Price for one share
Market Cap = 471,830,000 * $705
Market Cap = $332,640,150,000
Remember at the beginning of this post I said Amazon's market cap is at $333 billion? What do you know! I got $332.64 billion. Of course, the price of the stock is constantly changing -- but as long as your margin of error is no more than 3% then you're in good shape!
SO DO THAT INSTEAD OF SAYING AMAZON IS MORE EXPENSIVE THAN APPLE! Now, I really can't comprehend how amateur investors invest their money when they don't even know something as basic as that. But I really get depressed when amateur investors don't know how to find basic things like market cap.
A Message To Amateur Investors
Please learn some of the basics about investing. I know many amateur investors have others handle their investments, but pick up a gosh darn book. Even if it's a small 100-page book. You don't even have to read a book, you can just read articles, but I personally like books. There are millions of articles out there. Yahoo! Finance has enough information for amateur investors who don't manage their own portfolios. If you manage your own portfolio, you'll need to dig a bit deeper, and Nasdaq is a great place to start! Become the great investor that others think is impossible to accomplish! Prove them wrong!! Maybe one day, I'll be taking advice from you. :)
Thanks For Reading!
Next Time I'll hopefully be less depressed and I'll give amateur investors some tips!
Until next time! Watch my YouTube Videos!
Channel: xHitoBiteZ
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