Educate me

Hi Silvey. Like the above poster said this is a broad topic. Here are some Kentucky fast facts for you. The University of Kentucky is the winningest team in basketball history. Our state bird is the Cardinal. Our flower is the Goldenrod. Col. Sanders started KFC in his home town of Corbin,Ky. Ashley,Wynona and Naomi Judd are all from Ashland Kentucky. Ashley Judd,UK's biggest fan, graduated from University of Ky.

This request to tell you something you don't know but not giving any information as to what it is you don't know or are looking for, is a little broad. However, I did check your profile and noticed in a previous discussion that you were interested in learning more about stocks and investing, so I will take a shot at that. First of all, a share of stock represents a partial ownership in a corporation. Unlike a sole proprietorship where a single individual owns the entire company, corporations are owned by the shareholders. To greatly simplify, a person or group needs money to start a company, they determine how much they need to start it, select the number of shares of stock they want to offer and divide the amount of money they need by the number of shares they are going to offer to determine the share price and, if all works out as planned the shares will sell for the expected amount and the company will have the money they need. If the company sells 1 million shares of stock then each share will represent a 1/1 millionth ownership interest in the company. Once sold the individual shareholders are free to sell their share any time they wish. They are also entitled to a proportionate share of the profits of the company based upon the number of shares they own. Stock holders (owners) receive profits, usually quarterly (every 3 months) in one of two forms (or a combination of the two). The first form is a cash dividend representing their share of the profit. The second form is known as "retained earnings" in which the company keeps all or part of the profits and invests it in expanding the company - this should increase the value of the company and, since the company is more valuable so too should each share of stock. Stock prices are determined by supply and demand in the market. To a large extent, demand for stock is based upon what investors believe the company's value will be in the future rather than at present. The "book value" of a company represents the total current value of all of the company's assets (land, machinery, patents, copyrights, etc.) today divided by the total number of shares of stock. In other words, if the company were closed today and all of its assets sold and debts paid, the book value would be what stockholders would receive for each share. However, investors are interested in the future earnings potential of the company rather than the value of its assets so the price of a share of stock in a healthy company will be some multiple of its book value. Of course it is up to each individual purchaser of the stock to determine whether or not the current price of a stock really reflects the company's future earnings potential or if it is over priced. Prices of stocks, of course, can fall as well as rise and there is always the possibility that the company will fail and the stockholders lose their entire investment. To protect against this you should diversify your portfolio with stocks from different companies. Of, course diversification can be expensive, especially for young investors just starting out. A way around this is Mutual funds in which thousands of investors pool their funds with professional managers who then invest it in a pool of stocks. This tends to minimize losses to the investors in the fund when one or two stocks fall drastically while, at the same time increasing the chances that among the numerous stocks in the fund, some will have sizable increases thereby benefiting the investors. The other advantage of a mutual fund is that it is managed by full time professionals who do the research and keep up with the market daily and, hopefully, make better decisions than the individual owners who cannot spend full time studying the market. Prices of mutual fund shares are determined at the end of the day by taking the toatal value of all the stocks owned by the fund divided by the total outstanding shares in the fund. New purchasers the next day pay this amount for each share they purchase. Generally you do not purchase a specific number of whole shares like you do with most stock purchases. Instead you invest a fixed sum of money (most funds have minimum purchase amounts) and the fund invests the full amount in shares giving you full shares and a fractional share for any difference). Like stocks, mutual funds, every quarter, divide the dividend income received from the stocks owned by the fund and distributes that to the fund owners based on the number of fund shares each owns. Also, usually once a year, the fund will take the total amount it earned by selling stocks in the portfolio for a price higher than it paid for them, and divide that amoung the owners of the fund. Mutual funds usually work best as long term investments (although some people do trade in funds) people usually sign up and arrange to invest a fixed amount, either monthly or quarterly (the easiest way is to have the fund automatically withdraw the funds from your checking account each month or quarter). People also often exercise the option to have dividends and capital gains automatically re-invested. One danger of having the dividends and capital gains automatically reinvested is that, while you do not receive the cash, you still have to pay income taxes on these annual earnings. If you have a large amount invested in a fund, the dividends will probably be large and you may find yourself short of cash to pay your income taxes. A good way around this is to open an Individual Retirement Account (IRA) and make your investments in that account. Except under certain circumstances, you cannot withdraw these funds without penalty until you reach age 59 and 1/2 but the money grows tax free and you do not have to pay taxes on the earnings each year. There are two types of IRAs, traditional and Roth. For those who meet the income limitations and other requirments (and a college student should easily meet them) a traditional IRA allows you to deduct from income for tax purposes the money you invest in the IRA each year. The money grows tax free in the account and you only pay taxes on the amounts you withdraw each year after retirement. A Roth IRA is similar except that you don't get to deduct your investments in the account each year from current income for tax purposes BUT, in return, you don't have to pay income taxes on any of the money you have invested or earned when you withdraw it at retirement. This is obviously a highly simplified summary of investing in stocks but should provide you with enough background information to know what to look for and what questions to ask once you start investing.