Stocks are all of those shares in which ownership of an entity is divided. In English, the words are often used interchangeably with stock. A single share of stock represents fractional membership of the entity in whole amount. It means the right to have a right to some of the benefits of that particular share. A fractional right is not owned by an individual person alone; it is owned by a company or institution.
There are two types of stocks-known as common stocks and preferred stocks. Common stocks are all those stocks held by the companies in which you actually do business. For instance, let’s look at General Electric (GE). The company sells household electrical goods, clothing, home appliances, and other consumer products.
If you buy shares of General Electric at a certain price, you will own a small percentage (the ‘percentage share’ in Wall Street speak). You have a choice as to how you want to use the money you paid for your GE stock. If the company goes out of business, so does your stake in GE. If the company increases its market share, so does your percentage stake. So now you know why companies in the New York stock exchange (NYSE) or the NASDAQ (New York Stock Exchange) work hard to maintain market share by regularly (some may say daily) trading their stocks.
Preferred stocks, also known as preferred stock, are stocks that are owned by a company but not owned by an individual or organization. A preferred stock holder, like a preferred stock holder in the New York stock exchange, has a right to a portion of a company’s profits (either a fixed or a variable amount). Because these stocks are owned by the companies themselves, they are referred to as ‘preferred stock’. Now you are probably wondering what a preferred stock is – there are two main types of stock exchanges that deal with preferred stock – the New York stock exchange and the NASDAQ.
Pre-listing bonds, also known as bond issuing entities (BID) is a way for companies to raise funds. Bonds are issued by companies as a way to finance specific projects or activities. Usually the issuing company is itself a public company, although it may be owned by private investors or by the government. With pre-listing bonds, the issuing company declares a limited liability company to create a new type of security – one that has limited liability. It must then buy up at least a specified number of shares of this security from the bonds’ proceeds.
When you buy shares of stock from a mutual fund or an entity such as a corporation that is undertaking an initial public offering, you are usually buying ownership in that entity. You do not own 100% of that business or entity. Rather, you are buying a portion of ownership in the business or entity. When you sell stocks on an ongoing basis, you are typically selling ownership in a portion of that company’s stock, not ownership in the entire business or entity.