Stocks are all the shares in which ownership of a company is divided into an equal number of shares. In American English, however, the stocks are collectively referred to as “stock.” Each share of stock constitutes fractional ownership in relation to the overall amount of stocks owned by the corporation. There are two types of stocks in the United States; common stock and preferred stock. Within these two categories there are many different types of stocks.
Common stocks are the most common type of stocks in the United States. All the capital of the corporation is committed to them. The dividends and capital gains, which are the profits earned by the corporation are paid to the common stockholders. They represent a percentage of the total profits of the corporation.
Preferred stocks, on the other hand, are stocks that have additional voting rights attached to them. This means that unlike common stock, they can be sold (with the consent of the shareholders) and then sold again by the corporation to the new owners. The voting rights of preferred stocks are much more attractive to investors. However, they are not subject to the restrictions that apply to common stock. And there is some danger with them, as well, particularly if the corporations’ financial position does not improve substantially over a relatively short period of time.
Bond stocks, like shares in any other firm, represent legal debt obligations of that corporation. They are, therefore, secured by the assets of that corporation. The specific kind of bond is preferred stock. Unlike bonds, however, they are not exchange traded. Bond funds are managed by professionally trained investment advisers. They buy low-priced bonds and then sell them for a profit when the prices rise.
An exchange traded fund tracks the movements of individual stocks and then distributes their gains among all their investors. It is designed to help large institutional investors and wealthy people increase their profits by diversifying their investments. By spreading their risks over a wide array of assets, it is hoped that they will become more adept at managing their own investments.
When you are deciding what type of investment strategy you should follow, remember that whatever you choose will affect your life in many ways. A good plan of this sort can go a long way toward helping you achieve your financial goals. Stocks and bonds are an extremely important part of any financial plan. You should think about which ones are right for you when you are looking at your budget, your income potential, and your long-term goals.