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Stock Share Market Info

Stock Share Market: Learn the Basics

The first step towards understanding the stock share market is to understand stocks. A share of stock is nothing but the smallest unit of ownership in a business. If you own shares of a company stock, you become a part owner in the business.You get the right to cast your vote on members of the BODs and other important matters of the organization. If the company decides on distributing profits to shareholders, you are likely to receive a proportionate share. One of the exclusive features of stock ownership is the concept of partial legal responsibility. If the company you invested in; loses a court case and have to pay a huge amount, the worse that can happen to you is your stock becomes valueless. The creditors can not come after your private possessions.

There are two types of stock in stock share market:

  • Common stock

  • Preferred stock

Individually held stock is called common stock.

Common Stock: The majority of stock held by public is represented by common stock. Voting rights along with the right to share in dividends is included in it.

Whenever the words “stocks” being up or down comes, it always refers to common stock.

Preferred Stock: Notwithstanding its name, preferred stock has lesser rights than common stock, excluding in one significant area – Dividends. People holding preferred stocks usually get consistent dividends. Hence preferred stock holders have the first call on dividends over common stock.

Investors buy preferred stock for their current income from dividends, so look for a company that makes big profits to use preferred stock to return some of those profits via Dividends.

Why Common Stock is preferred than preferred stock:

Liquidity: Common stocks are highly liquid for the most part. No matter what is the size of the company whether small and/or big, but most of the companies trade daily creating an occasion to buy or sell shares. Thanks to the stock markets, you can buy or sell shares of most publicly traded companies almost any day the markets are open.

Cash in hand: Besides other benefits, common shares are cash in hand. You not only get the benefit of interest and vote but in case you need urgent Cash, it is in your hand only.

Credit ratings: Stocks that are publicly traded have common stock and bond ratings. These ratings are enhanced if they are public companies that can come to the public markets and raise cash to pay down debt or raise capital. As a result, rating agencies treat public companies that have enhanced liquidity as better risks than companies that must rely on private placements or bank lines of credit, so the cost of loans go down for companies that issue stock.

To conclude we can say that Stock Share Market represent ownership in a publicly traded entity and carry certain rights and privileges, including voting for BODs and sharing of profits.

Stock Share Market, Stock Market Invest

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