A stock investment is a great way to earn without having to directly hold the reins of a business. Buying and selling stocks is now not just for those who know about the stock market but also for the average Joe or average Jane. But before you can trade in the stock market, you have to know what a stock is and what it represents.
The first step is to define what a stock is. A stock is a representation of the smallest element of ownership of a company. Having a share of a company’s stocks is like owning a part of that company. This means you have a voice in choosing the board of directors and you have the right to take part in significant activities in the business. The stock price determines the value of the company against the amount of shares it issued to investors.
In some companies, owning a stock immediately means you are qualified to receive a share of the income proportionate to the number of stocks you own. A stock investment then becomes a very profitable deal when you have acquired the basics of trading after you have studied the movement of the company.
To start, there are two kinds of stocks, the common stock and the preferred stock. Of the two types of stocks, the common stock is the one held by the ordinary individual. They represent the shares owned by the public. Common stocks give voting rights and dividend shares. Stocks that go up or down are always common stocks.
Preferred stock on the other hand, despite its name gives the owner fewer rights except in the vital area of dividends. Preferred stocks usually translate into consistent dividends and usually have first call on them rather than common stocks.
Investors and traders favor high grossing companies that use preferred stock to have their profits returned via the dividends. Summarily, you can engage in stock investment in either of two ways and earn different benefits.
Common stocks though, are sometimes chosen over preferred stocks because of their liquidity. Most large companies have daily market movements. This gives the individual the chance to buy and to sell shares via the stock market on a day to day basis.
Stock shares are not always created equally. There are restricted, authorized, outstanding, float and treasury shares, each having its own unique characteristics. So before plunging into stock investment, you should have a clear idea of the different attributes of the aforementioned stocks. These are things you will need to know to make sound decisions and to be able to choose the best and most beneficial strategies before investing in a stock of any kind.
Stock investments can be risky but when you have the “know how”, profits will start to flow even when you are not holding the reins of the business. This gives you the opportunity to be more relaxed and at ease when trading because you do not hold all of the company’s assets in your hands. It is not entirely worry-free but it is a good way to earn and to learn the ropes of the stock market.