There are numerous people who believe that all they need do to be familiar with a stock is know the price of its shares. This is indeed an important piece of advice; it is also bit of the dilemma. All said and done, stock prices are always imperative. In any case, the stock market is actually a place for bidding and, hence, it is essential for everyone desiring to invest in stocks to be familiar with the cost of a stock. It is all the more essential to know about the value of a stock before you decide to buy or sell it.
Simply speaking, a stock quote or quotation denotes the prevailing price of a particular stock. In other words, the stock quote also denotes the price of a stock at which a broker is willing to buy or sell a specific number of shares.
In case, you are not aware of the prevailing price of a particular stock, you can just ask your broker for it. For instance, you may ask, "Can you provide me with the quote for Dell Computer?" And, the broker may answer back, "It's $15.04." In other words, this would denote that if you want to purchase a share of Dell Computer at its current value, you will be required to spend $15.04. Incidentally, for the majority of the investors the stock quotation is the most imperative bit of information that they can expect to get regarding a stock. The stock price lets them know what it would precisely cost them to purchase the stock or the amount they would be getting if they sold it.
It has been some time that some of the stock exchanges have been reluctant to tell people the instantaneous stock quotes and related information until they were paid very high fees for providing these data. Individual depositors who were not willing to cough up the fees could also obtain the information free of cost, but after around 20 minutes. And, by then, there would have been a lot of change in the stock price.
Things have, however, changes over time and now it is really easy to avail free instantaneous stock quotations 24 hours a day. For instance, an investor may obtain this bit of information by watching financial television programs on channels like the CNBC, Bloomberg or the CNNfn. In case, even this is not suitable, one can easily pick up the telephone and ask his or her stock broker (provided they have one) regarding the information. And if an investor can wait, he or she can always collect the information from the next day's newspaper. However, the simplest and most common way of find out the stock prices or stock quotes is by surfing the Internet. In fact, there are numerous business websites that continuously update the stock prices and provide you with the latest information on different stocks.
It is important to mention here that every stock has its individual ticker symbol - a system of letters used to exclusively recognize a stock. In fact, apart from the stocks, ticker symbols are also used to identify index funds, mutual funds, and bonds. Ticker symbols of some of the stocks are really simple to understand. For instance, the ticker symbol of IBM is plainly IBM, while the sign for Microsoft is MSFT, AT&T is T, for General Electric it is GE and Cisco is CSCO. In case you are not aware of the ticker symbol of a particular corporation, simply type the name of the company in the search box of any search engine like MSN, Yahoo! or MSN and they will provide you with the same within seconds.
It is important to note that the majority of the investors refer to a company by its ticker symbol and not its full name. In fact, anyone engaged in stock trading for quite some time always keeps in mind the ticker symbol of the most popular stocks in the market. Actually, one is able to tell the name of the stock exchange where a particular stock is registered simply by counting the number of alphabets in its ticker symbol. If a stock is listed on the National Association of Security Dealers Automated Quotation System (NASDAQ), its ticker symbol will comprise four to five letters. On the other hand, if a stock is listed on the New York Stock Exchange (NYSE), its tracker symbol will contain one, two or three letters.
While going through the stock quotation in detail, you will find two different stock prices - one stock price higher compared to the other. These two different stock prices are actually the bid price, the price you are asking to sell the stock you own and the ask price, the price you need to pay to buy a stock. The bid price as well as the ask price are very imperative, but baffling at the same time.
The price of the stock on the left is lower and is known as the bid price or offer price denoting the price you will get if you possess that stock and desire to sell it. The price of the stock on the right is higher between the two and is known as the ask price or the price you will be required to pay if you want to purchase that particular stock.
It may be mentioned here that the variation in the bid and ask prices of a stock is known as the spread. For instance, if the bid price of a stock is $15.05 and the ask price is $15.07; in this case, the spread is $0.02. Some years back, when the stock quotations were mentioned in fractions or divisions the spread was normally quite high, often the difference being equal to a dollar.
In the days when the difference between the bid price and the ask price was very large, an investor would lose substantial money on the spread if he or she purchased a stock and then sold it hurriedly. Hence, the lower the spread is, the better it is for the investors. Owing to the decimalization, in place of the fractions used earlier, the stock exchanges now present the stock prices in decimals. This change in the system has lowered the spread substantially and now it is fairly little - at times the difference between the bid price and ask price is as low as a penny or two. This has indeed been a boon for the investors.
Apart from presenting the bid price and the ask price, a detailed stock quotation provides several other information, such as the exceptional shares, market capitalization (MCAP), which represents the aggregate value of a company or stock, the amount of dividend being paid by a corporation (if at all it pays anything) and the volume of its stock trading. Moreover, an investor is able to perform a historical price search and also carry out a wide-ranging study on any stock or mutual fund with a detailed stock quote.
There are lots of people who think that the prices of the stocks establish whether a particular stock is a good deal or not. Unfortunately, very few people actually comprehend that a stock selling at $50 may be worth more when compared to a stock selling at $10. In the event of the $10 stock offers very insignificant or no earning at all and is burdened by huge debts, it would be wiser to purchase few of the $50 stocks rather hand buying lots of the $10 stocks. One is reminded of Warren Buffet, the king of buy-and-hold shares, who had once remarked that it is much better to purchase a wonderful company at a fair price compared to buying a fair company at a wonderful price. This is the simple reason why most experienced investors look for ratios such as the P/E (price/earnings) before buying any stock. It may be mentioned here that the price/ earning ratio or P/E can be obtained by dividing the price of a stock by the earnings of its individual share. The P/E of a stock enables an investor to settle on the fair price of a particular stock. In any case, it is definite that no one would want to be like the person who is familiar with the price of everything, but still ignorant of the value of anything!