Stock Market Basics - What Is A Stock?

A stock represents ownership of a part of a company. When you buy the stocks, you will receive a stock certificate that shows you own a piece of a corporation. For example, Company ABC issued 1,000,000 shares in total and you owned 10 shares, this meant you owned 1/100,000th of the company. The stock certificate will show the name of the stockholder and the number of shares owned.

As a stockholder, you do not just share part of the company, but also have a say in important matters of the company. In addition, some companies will pay you dividends out of accumulated profits.

The two main types of stocks are:
1) Common Stocks (or ordinary shares): If you hold ordinary shares, you have the right to vote on important matters that affect the companies you own. You may also entitled to receive dividends if they are declared by the Board of Directors.

2) Preferred Stocks (or preference shares): Like common stocks, preferred stocks represent partial ownership in a corporation. Preferred stock usually has a fixed dividend payout and has priority when it comes to dividends and bankruptcy. However, preferred stockholders do not usually enjoy any of the voting rights of common stockholders.

* Next: Introduction to Stock Trading - A Few of the Basics
0 comments: