Stocks, also known as shares, are all the securities which are owned directly by a shareholder. In American English, the stocks are collectively referred to as’stock’. A single share of an issuing company’s stock represents actual fractional ownership in proportion to its number of outstanding shares. As such, the owner of a particular share will therefore have a right to direct the flow of dividends and capital gains on his or her proportionate interest in the company’s stock.
The buying and selling of stocks on the stock exchanges is known as trading. Trading is often done through brokerage firms, as well as individual investors. The buying and selling of stocks can take place in ‘the market’ or via ‘brokerages’. The concept of brokers includes their services in buying and selling stocks and in making purchases and sales of stocks on behalf of their customers. Some stock exchanges even provide a facility of ‘institutional investment funds’ to allow smaller investors access to the stocks of larger corporations.
Most private investors usually buy low-priced stocks and sell them at higher prices when they increase in value. By buying low-priced stocks and selling them at higher prices, they make a profit. Most people can invest money in a limited partnership and use that money to purchase shares from the company that they own.
When a corporation makes profits, its owners usually receive a percentage of those profits. This percentage, called the dividend, is dependent on the ownership structure of the corporation. Normally, the more shares a corporation issues, the higher the dividend will be. For instance, in some case, one person will own a hundred million shares in a corporation, while another person will own a hundred million shares and the other one will own nothing.
Private investors are allowed to buy ownership shares directly from the issuing stock companies. These companies normally sell millions of shares every month to interested investors. These investors are also allowed to buy their own shares in the corporation. Some people who want to raise money for purchasing shares may opt for this option. However, they should remember that they are only entitled to a fraction of what the actual cost of their purchase is.
Two main types of stocks available to investors are common stock and preferred stock. Common stock is issued by organizations like general public or by companies registered in the US. Preferred stock is stocks that are personally owned by the investor. They are not registered in the US and are only available in some foreign countries. Some people prefer to invest in both the common stock and preferred stock because they think that they can earn more income if they purchase both kinds of stocks.