Stock Market FAQ
Here’s A Bonus Video
1. What Is A Brokerage (Broker)?
Simply put: It is required to buy and sell stocks
A broker is a person or firm who arranges transactions between a buyer
and seller for a commission when the deal is executed. A brokerage
account, also known as a securities account, holds financial assets on
behalf of an investor with a bank or custodian.
2. What Are The Best Brokers?
It depends on the country you live in and what your personal preferences
are. Some of the best online brokers include but are not limited to:
-TD Ameritrade
-E-Trade
-Fidelity
-Webull
Each has pros and cons, please do your research on each broker before
choosing one that suits your style. However, TD Ameritrade is one of the
best all-around platforms, thanks to ThinkorSwim.
3. What is investing?
Simply put: Investing is the process of putting your money in something
with that hopes that it will increase in price
Investing is the act of allocating money in the expectation of some benefit
in the future. One of the most recognizable forms of investing is through
financial investments in the stock market.
4. Where do I start?
Open a brokerage account with the broker of your choice. You must be at
least 18 years of age to open a brokerage account.
5. What if I am not 18?
If you are not 18, you may open a custodial account that is
administered by a responsible person, known as a legal guardian or
custodian.
6. What is the stock market?
The stock market is a collection of buyers and sellers who
represent ownership claims on the business. In other words, it is where
individual and institutional investors come together to buy and sell shares in
a public venue.
7. What is the Nasdaq or NYSE?
The NYSE, also known as the New York Stock Exchange, is located in
New York City. The NYSE operates seven liquid services including stocks,
bonds, exchange-traded funds (ETFs), options, and more. The Nasdaq
Stock Market (Nasdaq) is basically a smaller version of the NYSE. In
simple terms, these places are examples of where liquid services are
traded.
8. What is an Index?
Index stocks or funds are services that report how the stock market is
doing. Some examples of an index stock include the S&P 500, Dow Jones
Industrial Average, and Nasdaq Composite. These indices are stocks that
show the overall market trend.
9. How do you predict the stock market?
Although it is impossible to know the exact direction of the market, there
are tools and strategies that can be learned to gain an advantage in the
direction. This is called following the Trend and it is discussed in my free
course!
10. Why get involved with the stock market?
Investing in the stock market is an excellent way to grow wealth and create
a passive source of income through capital gains and dividends. There are
many different ways to grow wealth throughout the stock market. These
different types of instruments will be explained later in this FAQ guide.
11. What are some basic instruments traded within the stock
market?
-Equity Shares
-Options
-Bonds
-ETFs
12. Which investing strategy should I use?
There are many different investment strategies out there. It all comes down
to personal preference which path you want to take. Some strategies
include day trading, swing trading, futures trading, forex trading, long-term
investing, retirement investing and more.
13. How much money do I need to invest?
There is no minimum to get started investing.
14. What is the best investing strategy?
I encourage long term investing, dividend investing and/or trend investing.
To find more about both these strategies, check out my free course here!
15. What is retirement investing?
Investing money into the stock market for your retirement. This is where
your portfolio consists of diversity including stocks, bonds, cash
investments, and more. The securities you invest in will be determined
based on your timeline until retirement and your risk tolerance. This type of
investing serves as a source of income when retired.
16. What is trend investing?
Trend investing is the process of putting your money in stocks, industries,
or markets expected to grow consistently in the future. The idea is based
around “following the trend” until it is time to exit with secured profits.
17. When is the right time to invest?
The best time to invest is right now!
18. Who or where can I go to get investment advice?
This all depends on what type of investment advice you are looking for. For
all financial questions and purposes please reach out to your broker, CPA
or financial advisor. However, if you have any questions at all related to
stocks, investing or trend investing, I am more than happy to try and help
whenever I can. Feel free to email me at DM me on Instagram
@theimpeccableinvestor
-Disclaimer: I am not a registered broker, financial advisor nor a CPA. Everything I say
is purely my opinion.
19. What are commission fees?
This is the fee brokerages charge when you buy or sell a stock, option, ETF
or other type of investment product. Commission fees vary with each
brokerage. Please check with your broker to confirm the fees.
20. What is a stock?
A stock of a corporation consists of all of the shares for that company. In
other words, the term is used to describe the ownership certificates of any
company known as shares.
21. What is a share?
Shares of stock represent the equity ownership of a corporation. These
shares are divided up into units allowing multiple people to own a
percentage of the corporation.
22. Who is a bull?
A bull is someone who buys shares or holdings in a stock with strong belief
the stock will increase value over time. Simple terms: Opposite of a bear.
Bull = Up.
23. Who is a bear?
A bear is someone who believes a particular stock, security, or overall
market is headed in a downward direction and attempts to profit in the
decline of stock prices. Simple terms: Opposite of a bull. Bear = Down.
24. What is a blue-chip stock?
Blue-chip stocks are large companies with a great reputation (market
valuation of $10 billion or more). These companies are well known,
financially stable, and have dependable earnings. Some examples of
blue-chip stocks include AAPL (Apple), BABA (Alibaba Group Holding), FB
(Facebook)
25. What is a penny stock?
A penny stock refers to a small company operating under a small cap. The
standard definition of a penny stock states it is a stock that trades for less
than $5 per share. Some penny stocks can be seen on the New York Stock
Exchange.
26. What is equity?
Equity is the same as stock as both represent ownership in a company or
corporation. They are traded on the stock exchanges. These terms can be
used interchangeably.
27. What is an IPO?
An IPO stands for “Initial Public Offering”. The title refers to when a
company launches a public offering such as shares for the first time. The
shares of the company are sold to both institutional investors and retail
investors.
28. What is the market cap?
Market cap is the market value of a publicly traded company’s shares. It is
calculated by multiplying the price of a stock by its total number of
outstanding shares.
29. What is a bond?
A bond is a fixed income instrument that represents a loan made by an
investor to a borrower, usually corporate or governmental. Think of it as a
loan where the corporation or government owes the money back to the
loaner.
30. What is yield?
Yield is the return measurement for an investment over a set of period of
time where it is expressed as a percentage. These yields are also known
as dividends.
31. What is the p/e ratio?
The price-to-earnings ratio, also known as the p/e ratio, is the ratio that
measures a company’s current share price in relation to its per-share
earnings. In simpler terms, it is a good tool to use when trying to figure out
if a stock is overvalued or undervalued. A high p/e mean investors are
expecting to post higher earnings for that stock. Do NOT rely simply on p/e
when investing in a stock.
32. What are the sectors?
The stock market is divided into eleven sectors.
1. Financials
2. Utilities
3. Consumer Discretionary
4. Consumer Staples
5. Energy
6. Healthcare
7. Industrials
8. Technology
9. Telecom
10. Materials
11. Real Estate
33. What is diversification?
Diversification is a strategy that reduces risk by engaging in different
investments among various financial instruments, industries, and others. A
diversification example includes stocks, options, and bonds.
34. What is hedging?
A hedge is an investment position intended to offset a potential loss or gain
in another investment.
35. How do I find the best stock?
This is a rather complicated question as there are many different ways to
answer. Some stocks can be found through, the news, word of mouth,
credited sources and more. Other stocks can be found by utilizing stock
scanners. However, I have found that the most profits come from stocks
that trend well! I explain how to find that trend well in my Stock Market
Mastermind course!
36. What stocks should I avoid investing in?
This question is rather complicated as well because it all boils down to
personal opinion. When investing, steer clear of the following types of
stocks:
1. Low liquid companies: Makes it hard to buy and sell out of positions
2. High debt companies: Debt increases riskiness because it means that
the company owes investors money
3. “Falling-knife stocks”: Stocks that are continuously falling showing NO
signs of an uptrend
4. Unknown companies: Stay away from companies that offer little to no
information about their company.
37. How much return can I expect from investing in the market?
By using a trend investing strategy, you can safely and accurately expect
25-30% in a year. If you would like to learn more about my secret
approach, check out my free course!
38. Can I become a millionaire by investing in the market?
In short, yes. However, it is not as easy as it seems. Investing the stock
market takes time and effort. This practice is not something that will make
you a millionaire overnight. However, with the right steps and guidance it is
definitely achievable. Please see disclaimer.
39. Why do people lose money in the market?
People lose money in the stock market for many different reasons. One of
the greatest reasons why people lose is because they let their emotions get
the best of them and encourage greed and fear. It is important to learn
how to invest and control your emotions.
40. How to value a stock?
There are several ways to value a stock or a company. To keep it simple,
an easy way to quickly value a company is through its dividend yield or p/e
ratio. When valuing a company it is important to perform your own research
and create your own thesis. You can learn more about stock valuation in
my free Stock Valuation Playlist on Youtube!
41. How many stocks should I invest in?
The number of stocks you invest in should be decided based on your
experience and your capital. When first starting out a good goal to aim for
when investing is no more than ten stocks in your portfolio at a time. As you
become more experienced you may continue to add diversity to your
portfolio.
42. What is a mutual fund?
A mutual fund is a professional managed investment fund or portfolio that
gathers money from many investors to purchase securities such as stocks.
This is a great way to add diversification to your portfolio.
43. What is an ETF?
An exchange-traded-fund, also known as an ETF, is an investment fund
traded on the stock exchanges. Think of it as a mutual fund but in the form
of a stock. ETFs can include securities such as stocks, commodities, or
bonds. ETFs are another great resource for diversification. A popular
example of an ETF is ticker symbol: SPY
44. What is an inverse ETF and how do they work?
An inverse ETF is traded on the stock market which does the opposite of
whatever index or benchmark it is tied to. For example, when the ES goes
down, the inverse ticker, SPXU, goes up.
45. When is the market open and closed?
The regular trading hours are from 9:30AM-4:00PM Monday-Friday. The
stock market is closed on holidays including, but not limited to, Memorial
Day, 4th of July, Christmas, and more.
46. What does “Long” mean?
When someone “goes long” on a stock or bond, the investor strongly
believes the asset will rise. Long = Up
47. What does “Short” mean?
When someone “goes short” on a stock or bond, the investor strongly
believes the asset will fall. Short = Down
48. What is a “bid”?
The bid represents the highest price at which an investor is willing to pay
for a share.
49. What is an “ask”?
The ask represents the lowest price at which an investor is willing to sell
their shares.
50. What makes a stock go up and down?
A stock price fluctuates due to supply and demand. An easy way to think of
the stock market is like one giant auction house. Some people are placing
bids while some people are placing “asks” or selling their assets. More
demand causes the stock to increase, more supply causes the stock to
decrease in price.
51. What is a dividend?
A dividend is when a company earns a profit or surplus and it is able to
share its profit as a dividend to their shareholders.
52. What is day trading?
Day trading is simply buying and selling a security on the same day.
53. What is swing trading?
Swing trading is buying security on one day and selling on another day.
This is where an asset is held between one and several days or sometimes
even longer.
54. What is the Pattern Day Trading (PDT) rule?
In simple terms, it is a rule mandated by The Financial Industry Regulatory
Authority (FINRA) that states if you have a margin account with less than
$25,000 you cannot make more than three day trades in a five business
day period.
55. What is a cash account?
A cash is account is where all transactions must be made with available
cash or long positions. All trades are made with cash that has deposited
into the account. Please keep in mind, when depositing money into your
account, the money needs time to settle.
56. What is a margin account?
A margin account is a brokerage account where the broker lends the
customer cash to purchase securities. There is an interest rate created by
the broker on the money you loan from them. The loan in the account is
collateralized by the securities purchased with the cash. Margin accounts
are extremely dangerous and risky. Please consult with your brokerage
before choosing the account that is best for you.
57. What is paper trading?
Paper trading is one of if not the best way to practice trading stocks with
fake money. In short, it is a type of trading that simulates real trading
without any financial risk. Please check with your brokerage to learn if they
offer paper trading.
58. What is the best charting platform?
Here at The Impeccable Investor we recommend using TD Ameritrade’s
free charting platform, ThinkorSwim.
59. What is a stock screener?
A stock screener is a tool that investors and traders use to narrow down
and search for the types of stocks they want to invest in.
60. What is the best stock screener?
There are many stock screeners out there that are great to use. One of the
best screeners out there is Finviz.
61. What is a stop-loss?
A stop-loss is a type of order or where an automatic trade is placed to sell a
certain security. This is a useful order type to manage risk.
62. Should I use a stop loss on my investments?
It is strongly encouraged to use a stop-loss or at least a “mental” stop loss
when investing in securities.
63. What happens if a company goes bankrupt?
When a publicly-listed company declares bankruptcy, it goes into
liquidation. If you are holding any shares of the bankrupted company, your
shares become worthless and cannot be sold. Do your research!
64. What is Support?
Support represents a low level a stock price reaches over time. This is
where shares or assets are bought a majority of the time. Support = Floor.
65. What is Resistance?
Resistance represents a high level a stock reaches over time. This where
shares or assets are sold a majority of the time. Resistance = Price Ceiling.
66. What is a double top?
A double top can be observed through technical analysis of a stock. It is an
extremely bearish pattern where price reaches a high price two consecutive
times and fails to go past that price.
67. What is a double bottom?
A double bottom can be observed through technical analysis of a stock. It is
an extremely bullish pattern where price reaches a lows price two
consecutive times and fails to go past that price.
68. What is SMA?
Simple moving average, also known as SMA is a moving average that is
calculated by adding recent prices and then dividing that number by a
specific time period. In simple terms, it is an average price within a certain
time period.
69. What is RSI?
The relative strength index or RSI is an indicator used to measure the
speed and change of price movements. The RSI or stock is considered
overbought when above 70 and oversold below 30.
70. What is MACD?
Moving average convergence/divergence, also known as MACD, is another
indicator used in technical analysis. It is designed to show changes in
strength, direction, and momentum during a trend.
71. What is the best indicator?
Although this question is asked a lot, it all depends on how you use
indicators and your personal [Link] are indicators like RSI
(which shows highs and lows), MACD (which shows highs and lows) and
the Trending Band Indicator (which shows you exactly where to buy and
sell). If you want to learn more about my custom Trending Band Indicator,
you can check out my course here!
72. What is an option?
A stock option is a contract between two parties in which the stock option
buyer (holder) purchases the right (but not the obligation) to buy or sell 100
shares of a stock at a predetermined price within a fixed time period. If you
want to learn more about options, check out My Options 101 Playlist!
73. What is a call?
In short, a call option is a contract where you believe the stock will go up.
74. What is a put?
In short, a put option is a contract where you believe the stock will go down.
75. What are the greeks in options trading?
There are several terms traders refer to as Theta, Gamma, Delta, and
Vega. These greeks can help you better understand your risk to reward
ratio.
76. What is Theta?
In simple terms, Theta represents the decline in value of an option due to
the passage of time.
77. What is Gamma?
Gamma is the rate of change for an option’s delta. It is the response to
movement. Gamma is at its highest when a contract is “in-the-money”.
78. What is Delta?
Delta is the amount an option price is expected to move based on a $1
change in a stock.
79. What is Vega?
This greek is not as commonly referred to as the rest. Vega is the
measurement of an option’s price sensitivity to changes in the volatility of
the stock.
80. What is Alpha?
Alpha measures risk of a stock. A positive alpha simply means the stock is
outperforming its sector or market. A negative alpha means the stock is
underperforming in its sector or market.
81. What is Beta?
Beta is a measurement of a stock’s volatility. High-beta stocks are riskier,
but provide higher return potential. Low beta stocks are less risky, but
provide lower returns.
82. What are some strategies for options trading?
There are many different strategies in the world of options trading. To name
a few, credit spread, debit spread, iron condor spread, butterfly spread, and
more. Feel free to check out the course to learn how to play these
strategies.
83. What is risk-management?
It is the process of identifying risk and developing strategies to minimize
and manage risk while maximizing return.
84. What time frame charts should I use?
Different strategies use different time frames. However, it is important to
look to the left and use all time frames.
85. How do I become a better trader?
Time, patience, and effort. No, really, it is that simple. With the correct
guidance and mentor anyone can make money in the market! It is all about
how you approach the market!
86. Do I need a financial advisor?
This is up to your own personal opinion. They are not necessary by any
means, but can be extremely helpful. I personally have never used one but
that is because I enjoy managing my own money.
87. How do you calculate a risk to reward ratio?
Divide your net profit by the price of your maximum risk. For example, to
make $1, you risk $1. This would be an example of a 1:1 ratio.
88. What are taxes on capital gains?
Be sure to factor in your capital gains into your taxes! Capital gains are
taxed differently, please be sure to contact your brokerage for more
information. You can learn all about taxes when it comes to capital gains in
my Stock Market Mastermind course!
89. Is the S&P 500 the best long term investment for passive
income?
Yes, the S&P 500 is one of the best ways to generate passive income in a
long term investment.
90. Why are some people afraid of investing?
The market can be overwhelming at some points and can be quite scary.
The returns are not guaranteed and there is a certain amount of risk that
needs to be accounted for while trading. However, this fear can be reduced
through the process of paper trading and studying.
91. What are some common mistakes every novice trader makes?
There are many common mistakes that all beginner traders make. Some of
the biggest ones include lack of preparation, rushing into things, sizing of
positions, blindly following systems or trade alerts, and many more.
92. What is fundamental analysis?
Fundamental analysis is the analysis of a business’s financial statements,
overall condition, competitors, and more.
93. What is technical analysis?
Technical analysis is an analysis method to try and predict the direction of
prices through the study of past market data based mostly on price and
volume.
94. How much time should I spend studying charts?
The more the better! You should try and devote as much time as you can
studying and reviewing charts. More exposure can lead to huge returns.
However, this profession is not a race, it is about accuracy and effort. Make
sure to put in the work and time to fully understand these charts. Please
see disclaimer.
95. How much time should I spend researching a stock?
Before investing into any stock it is important to do your research on the
stock. Not too much time is needed, but enough time should be devoted to
researching the stock where you feel comfortable and knowledgeable
about the company. Based on your research you should be able to
determine whether or not to invest in the stock through fundamental and
technical analysis. I personally believe that technical analysis and common
sense will tell you the whole story.
96. Is investing in small caps more profitable than investing in large
caps (stocks)?
Large cap stocks are more likely to be mature and developed companies,
which generally means they will be less volatile providing less risk.
However, the large cap stocks tend to be some of the more expensive
stocks offered on the market. Small cap stocks are the opposite. They are
less developed companies, which provide more risk and volatility. However,
these stocks tend to be inexpensive and yield higher returns.
97. What are cryptocurrencies?
In simple terms, cryptocurrency is digital or virtual money. Some examples
of cryptocurrency include Bitcoin, Ripple, Etherium, and more.
98. Should I invest in cryptocurrencies?
I personally stay away from cryptocurrencies because unlike stocks, they
have no underlying fundamental value. You should stay away from them
unless you are actively trading them.
99. Can I join your discord (group chat)?
Yes, please feel free to join my free discord here!
100. What stocks do I see good long term potential in?
I believe some stocks that have great long term potential include
1. Visa
2. Microsoft
3. Disney
101. What do you think bitcoin/stocks/etc will do over the next few
months?
Nobody can guess the future! I believe you should just focus on following
the current trend of the market whether you agree or disagree with the
trend because that’s how you make money!
102. Can you guide me through/teach me how to invest?
Yes, I offer a free course as well as a free discord channel. I also answer
all my DMs and try to help wherever I can (no promise on when I will
respond though lol)! However, my students who pay for my premium
course get prioritized access to my help.
103. Do you have any advice for this correction/recession period?
Use the Trend Investing Band to make money on the way down or invest in
Dividend king stocks that will help you make money on the way down!
104. What platform do I use to invest?
I use the Robinhood platform for my smaller account and TD Ameritrade for
my lager investment portfolio
105. What do I think about (fill in a brokerage)?
TD Ameritrade (ThinkorSwim): Love and use them
Robinhood: Best for long term investors
WeBull: Better for traders
E-Trade: Like TD Ameritrade
Fidelity: For long term investors
106. What do you charge to be a personal adviser like telling me
when to buy and sell?
Because I am not a licensed financial advisor, I can not be a personal
advisor to you. However, if you want to view my weekly alerts which include
the top stocks to buy and my personal portfolio, then you should check out
my Stock Market Mastermind course!
107. What are the best books to read for investing?
I personally love all the stocks written by Peter Lynch: One up on Wall
Street and Beating The Street. I also enjoyed the Man Who Solved The
Market
108. Do you have a Youtube channel?
Yes! Check it out here!
109. Should I use the cash app to invest?
The cash app should not be used to buy stocks because it is not a broker,
but an app for transferring money.
110. How do I become one of your students?
If you want to have access to me and my course to speed up your learning
process, you can become one of my students by joining Stock Market
Mastermind course! I have over 150+ students across 5 different countries,
you can check out their testimonials here!