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Wall Street was filmed in the late 80's and although Electronic Communication Networks (ECN) existed at that time, their usage was not widespread as they were more the exception than the rule. At that time, the process for buying and selling stock was for a broker to call the exchange whereupon a runner brought the order to the brokerage firm's floor ...


6

A lot of these are readily googleable, but: What is the 'pit'? The area where open outcry traders stand. Sometimes these are set into the floor or stepped down, so the people at the edges can see each other over the heads of those in the middle. What's a 'market maker'? What's a 'floor trader'? Someone trading on the floor on their own account - the ...


4

It is of course not true that nothing beats the S&P 500 in the long term. There's certainly nothing magical about the number 500 and it may be that a slightly different allocation would be better, even over the long term. In practice, "nothing beats the S&P 500" is used as a short hand for "nothing beats the market average". The ...


3

On many stock exchanges, a single-price auction (call auction) occurs at the open (and at the close). Every order executed at the open gets executed at the same price. On the NYSE, this auction is called an opening auction. On the NASDAQ, this auction is called the opening cross. If your order was filled at the open, it would be filled at the opening price.


2

The stock market isn't interested in ethics. So if profits are going down by 90%, then the share price will go down. But the amount it goes down by is entirely down to how potential investors now view the company. There is no formula that will tell you that. The loss in share price may be lower if the company is anticipating future regulation, and ...


2

Stock prices can drop for many reasons. It can be caused by poor earnings reports, poor earnings projections, national political news, geopolitical news, terrorism, change in Fed policy, proposed or actual legislative news, inflation fears, rumors, ad nauseum. Even in hindsight, it's impossible to determine the specific cause unless there's a singular ...


2

Preferred stocks are income securities that pay an annual dividend (usually quarterly but sometimes monthly or semi-annually) unless they are fixed/floating issues. Most are issued at $25. Most have no maturity date but they are callable at the issue price five years after the date of issue hence they 'don't grow' unless it's a convertible preferred. GOOG ...


2

It could be a major bookkeeping headache if you are trying to mimic a mutual fund that has many holdings (tracking open positions and tax filing once closed). You'd need a fair amount of capital unless you used a broker who offered fractional shares. Commissions would have to be very low or zero otherwise you would pay more in fees than the fund which has ...


1

Decades ago most transactions involved buying shares in lots of 100 shares. A high price could block some investors. Then things progressed. Many people own shares through their mutual fund or ETF. This can be through a taxable account or a retirement account. A large fund doesn't have any issues with high share prices. Now many brokers are allowing ...


1

It is a simple measure. The number of shares is easily available and the price as well. Calculating market capitalization is a simple multiplication and you get what the market thinks the company is worth. It is a number that is easily comparable against other companies. To my knowledge, such comparisons are typically based on the total market capitalization,...


1

I understand the S&P 600 is more volatile due to its small-cap focus, but in the long-term it clearly seems to be the better option, right? The key word is risk-adjusted returns. I didn't run the numbers but I'm willing to bet that the risk-adjusted performance (e.g. Sharpe ratio) of the S&P 500 beats the S&P 600. Additionally, the S&P 500 ...


1

In investing: Perfect is the enemy of good. Investing is not really about precision and eking out every last basis point of gain. It is about coming up with a good asset allocation and trying to avoid doing something dumb that will cause you to lose many years of gains in an instant. People should be diversified in their investments. You will likely have ...


1

I've found it surprisingly hard to find information on exactly how the execution price of an order is determined. This is my understanding, based on my own experience and research, of what happens when you place a limit sell order for $x: If, at the time the order is processed, the highest limit buy order in the order book is $y, and y >= x, your order ...


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