You must have your fundamentals crystal clear to master any trade and share market is no exception.
The baby step towards mastering share market is to understand stocks. In layman's term, stock represents the part of company's assets and earnings. A single share of stock is the smallest unit of ownership in a company. The share holder is entitled to the company's earnings and is also responsible for its risks for the portion of the company that each share represents. One of the unique features of stock ownership is the notion of limited liability.
Preferred stock holders do not usually have voting rights, but receive a minimum dividend, many a times guaranteed. Preferred stocks gives the holder a claim prior to the claim of common stockholders on earnings and also generally on assets in the event of liquidation. Some preferred stocks are convertible, which means they can be changed into common shares at a certain ratio so that even preferred shareholders without voting rights have the possibility of gaining them. Preferred stocks tend not to appreciate as fast as common stocks. The share prices also tend to be less volatile than the prices of common stock. One way to think of preferred stock is as a financial instrument that has characteristics of both debt (fixed dividends) and equity (potential appreciation).
Stock may be bought or sold, usually, though not always, in the context of a securities exchange.
The baby step towards mastering share market is to understand stocks. In layman's term, stock represents the part of company's assets and earnings. A single share of stock is the smallest unit of ownership in a company. The share holder is entitled to the company's earnings and is also responsible for its risks for the portion of the company that each share represents. One of the unique features of stock ownership is the notion of limited liability.
There are two types of stock:
- Common Stock
- Preferred Stock
Common stock is a class of capital stock that has no preference to dividends or any distribution of assets. Common stock usually conveys voting rights and is often termed capital stock if it is the only class of stock that a company has outstanding (that is, the company has neither preferred stock nor multiple classes of common stock). Common stockholders are the residual owners of a corporation in that they have a claim to what remains after every other party has been paid. The value of their claim depends on the success of the firm. Common stock holders have the right to vote on major company decisions, such as whether or not to merge with another corporation, right to vote for the company's board of directors, and receive dividends determined by management. Common stock holder also have the right to sell their stock and realize a capital gain if the share value increases. Most of the stocks held by individuals is common stock.
Preferred stock holders do not usually have voting rights, but receive a minimum dividend, many a times guaranteed. Preferred stocks gives the holder a claim prior to the claim of common stockholders on earnings and also generally on assets in the event of liquidation. Some preferred stocks are convertible, which means they can be changed into common shares at a certain ratio so that even preferred shareholders without voting rights have the possibility of gaining them. Preferred stocks tend not to appreciate as fast as common stocks. The share prices also tend to be less volatile than the prices of common stock. One way to think of preferred stock is as a financial instrument that has characteristics of both debt (fixed dividends) and equity (potential appreciation).
Stock may be bought or sold, usually, though not always, in the context of a securities exchange.
