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Higher price

 1. A common understanding about stock is that when shares are sold at a higher price while purchasing at a lower price, there is a profit. When shares sold at a lower price while purchased at a higher price, there is a loss. Another fact is, when a company’s share is steady at a high price, the worth and value of such share is of great benefit to customer, as it returns high dividends, which is a reward paid by the company to investors from yearly profits made by the company and secondly, high share price enables an investor to take personal loans, mortgage loan from banks basing on the net worth of shares.

This is the basic knowledge about stocks. Investor does not have to feel low about rise and fall of share market whereas referring to the shares where investments are made, one has to take note of daily opening and close of those stocks where investment has been made. For example, A has purchased a stock for $6000, and at the end of the year the stock worth reached upto $7500 and A has also received a dividend of $500, which means A has a total return $7500

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– $6000 = $1500 + $500 = $2000 / $6000 = 0. 333 which means that the total return of A is 33. 3 percent.

2. Beta measures and signifies the volatility and swing of a particular stock in the stock market. Beta can measure the risk informing the investor whether to keep the stock or sell it away. When a particular stock swings more than the market it has a beta above 1. 0 and returns higher profits whereas there is more risk. Technology stocks that are traded at Nasdaq indicate beta above 1. 0. Beta and S&P 500 index are similar to a mirror in informing an investor about the risk and volatility in the stock market. When a particular stock is lower than the market rate the stock’s beta is less than 1. 0, it indicates less risk and also low returns.

3. Diversification implies that investment of funds in treasure bonds, mutual funds, stocks which again are divided into utility, high-tech and counter cylical work out to different form of earnings for an investor. 4. 5. Diversified portfolio means investment of funds in equity which is again divided into high-tech companies, utility companies and counter-cylical companies and again a part of investment is also made in bonds, mutual funds and treasury bills which are government bonds.

An investor never focuses investment in one particular area only, whereas a proportionate investment is always chosen in Bonds, mutual funds and stocks with the fact bonds and mutual funds earn a regular and fixed income while being extremely safe for investments, investment in equity stocks requires a constant check either through a financial and equity stock consultant or a stock broker who would decide which stocks have to be retained and which stocks have to be sold off in order to reduce risk and also keep away from incurring losses.

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