What are Stocks?
Learning stock trading can be fairly simple; stocks are a share in the ownership of a company. When one buys a small part of a corporation they are then described as a stockholder or shareholder that can claim earnings on the corporations’ assets. As the shareholders or stockholders, traders reserve the right to claim ownership of part of the corporation they have shares in.
As the corporation’s earnings rise, so does the value of the stock. When one is a shareholder, he or she is entitled to the corporation’s profits and receive claim on the assets. Profits are paid out as dividends, and the more shares a stockholder owns, the larger amount of profits he or she receives.
Be careful, because on the other side of the coin, the corporation can go bankrupt. The claim on assets for stockholders becomes essential if a company goes bankrupt. In that case, the stockholder will receive only what is left after the creditors has been paid. In essence a stock’s value is determined by your ownership to a successful company’s assets and earnings. Be careful when choosing a stock.
Stock Trading Basics
Common Stock: The most common stock issued in the US. Owners are able to collect dividends if the company pays them and then the shares can be sold at a profit if the prices increase.
*Stock prices change so shares have the ability to lose value.
Preferred Stock: These stocks are equity investments which trade in a secondary market and are listed separately from a company’s common stock. Preferred stock is also traded at a different price, and stock dividends are guaranteed. Have a share in preferred stock allows for the shareholder to be more likely to recover from the investment if the company fails or goes bankrupt. Three Stock Market Listings:
NYSE: New York Stock Exchange
NASDAQ: The NASDAQ stock market
AMEX: American Stock Exchange
Stock trading can be risky due to the fact that there are no individual guarantees whether one is advanced or starting out as a beginner in stock trading. The value of stocks change as the market changes, and some companies are required to pay dividends and others are not. Taking on a risk however, can mean a great return in your investment in the future.