Editing 1course Stock Market (section)

== Fundamental Concepts ==

=== 1. Diversification ===
'''Diversification''' is the practice of spreading your investments across various assets to reduce risk. By diversifying, you protect yourself against the poor performance of any single investment.

=== Example: Instead of putting all your money into tech stocks, you could diversify by investing in tech, healthcare, and energy sectors. ===

=== 2. Risk and Return ===
'''Risk and Return''' are directly related in investing. Higher potential returns usually come with higher risks. Understanding your risk tolerance is crucial for building a portfolio that matches your investment goals.

=== Example: Stocks generally offer higher returns than bonds but come with greater volatility. ===

=== 3. Compounding ===
'''Compounding''' is the process where the returns on an investment generate their own returns. Over time, compounding can lead to exponential growth of your investment.

=== Example: If you invest $1,000 at an annual return of 10%, you’ll have $1,100 after one year. In the second year, you earn 10% on $1,100, and so on. ===

=== 4. Market Capitalization ===
'''Market Capitalization (Market Cap)''' is the total market value of a company’s outstanding shares. It’s calculated by multiplying the current share price by the total number of shares outstanding.

=== Example: A company with 1 million shares outstanding, each priced at $50, has a market cap of $50 million. ===