Touching on the basics for a novice investor
QI have three questions. 1. What is the difference between the New York Stock Exchange, Nasdaq, and the stocks listed by each exchange? 2. How do you receive dividends and capital gains when investing in a stock? 3. Is it possible to be successful enough investing in stocks where one doesn't have to work?
A.M., Iowa Park, Texas
A1. The New York Stock Exchange is a trading exchange located on Wall Street in New York City. Companies listed on the Big Board tend to be large US and foreign multinational firms, such as Boeing, or General Motors.
Nasdaq, by contrast, is an electronic trading system administered by the National Association of Securities Dealers in Washington. Its firms tend to be smaller, with many of them in the high-tech sector. Nasdaq does have some giants, though, such as Microsoft and MCI Worldcom.
2. Dividends, which are payouts of earnings by a firm, are usually sent out quarterly. They can be taken as cash or reinvested in additional stock. Capital gains occur when the value of the stock exceeds the original purchase price. It is "realized" when you sell the stock.
3. While the very wealthy may be able to live solely off their investments, average investors have a far harder time. Federal regulators are now reportedly investigating day trading, following allegations that many, and perhaps even most, day traders actually lose money over time.
QCould you please list three companies from which you can purchase shares directly? Please list stocks that pay dividends and show their required minimum purchases.
T.F., Murrysville, Pa.
AHere are three: Walt Disney (minimum: $1,000), at 800-948-2222; Home Depot ($250), at 800-928-0380; Wal-Mart ($250), 800-438-6278.
For a comprehensive list of firms offering direct-purchase plans or dividend-reinvestment plans, contact Net Stock Direct (www.netstockdirect.com) at 1000 124th Avenue NE, Bellvue, WA 98005. Or the Money Paper (www.moneypaper.com) at 800-388-9993.
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