Stocks
To own a stock is to own a share of the company you have invested in. Owning a share or stock of a company does not necessarily give share-holders rights to manage day to day business, but it does give share-holders voting privileges.
Stock takes the form of shares of either common stock or preferred stock. Common stock provides voting rights that can be exercised in corporate decisions. Preferred stock differs from common stock as it doesn’t provide voting rights but is legally entitled to receive a certain level of dividend payments before any dividends can be issued to other shareholders. The stock price fluctuates due to the theory of supply or demand. However, there are many factors on the basis of which the demand for a particular stock may increase or decrease. These factors are studied using methods of fundamental analysis and technical analysis to predict the changes in the stock price. Stock price is also changed based on the forecast for the company and whether their profits are expected to increase or decrease.
There are various methods of buying and financing stocks. The most common means is through a stock broker. Whether they are a full service or discount broker, they arrange the transfer of stock from a seller to a buyer. There are many different stock brokers from which to choose, such as full service brokers or discount brokers. The full service brokers usually charge more per trade, but give investment advice or more personal service; the discount brokers offer little or no investment advice but charge less for trades. Another type of broker would be a bank or credit union that may have a deal set up with either a full service or discount broker. There are 2 ways of purchasing stocks i.e. purchase stock with current buyer’s ownership or by buying stock on margin. Buying stock on margin means buying stock with money borrowed against the stocks in the same account. These stocks, or collateral, guarantee that the buyer can repay the loan; otherwise, the stockbroker has the right to sell the stock (collateral) to repay the borrowed money. Selling stock is similar to buying stock. As with buying a stock, there is a transaction fee for the broker's efforts in arranging the transfer of stock from a seller to a buyer. This fee can be high or low depending on which type of brokerage, full service or discount, handles the transaction.
Thus, it is very important to work with your financial advisor and tax professionals while evaluating the strategies to take full advantage and profits of investing in stocks.