What You Need To Know About Stocks

 


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Stocks have been the greatest financial tools of an investor's portfolio that can generate quick income as you sit back at home. These financial instruments have a large bearing on an investor's money making expedition. With the passage of time common people have entered into the market in a big way and the market is no more a playground for the rich only. Moreover technological revolution and the demand and supply of stocks have made it possible for every single person to own them in their portfolio. As more and more people enter into this marketplace the need to understand the markets and the actual nature of stocks has come in. Though people trade these financial instruments daily, their understanding of stocks is a little weak.

STOCKS

A stock is a share in the share value or the ownership of a company. It symbolizes a claim in the asset value of the company as well as in its earnings. Bigger the holding, greater the share a person has in the particular company. It doesn’t imply that if a person has the stocks of a company he can make the management dance to his tunes. It is only large investors who have a huge amount of holdings who can actually have an influence on the management and can command a hold over the company in case the company goes bankrupt.

However stocks may or may not be paid dividends at the end of the financial year. Some companies pay dividends while some don’t. There is however no compulsion to pay them. Apart from dividends stock trading is the only way to earn a lump sum.

Types Of stocks

1. Equity or common stocks- These may be obtained in the form of initial public offers and may earn dividend at the end of the financial year. They have voting rights.
2. Preference stocks- These stocks are given a preference in the dividends and do not carry any voting rights.
3. Debentures- Debentures are loan money taken by the company to raise its capital. They are paid interest at par with the bank rate.

How Stocks Trade

Stocks trade on the stock market usually through a broker. A person can ask him for the shares he wants to purchase and the broker arranges them. He takes a minimum commission for every transaction. However these days’ stocks are increasingly being traded on the internet. So almost all stocks a person wishes to possess are available on the internet.

Why Stocks fluctuate in price
1. Demand
2. Supply
3. Dividend declaration
4. Non declaration of dividends
5. Media speculations
6. Management decisions
7. New projects of the company
8. Mergers and acquisitions
9. Financial year profits declaration

Stock Market Participants Bulls

Bulls are those traders and investors who believe that the stocks are going to rise. They see some possibility of a rise in various stocks of companies.

Bears

Bears are those market people who believe that stocks are going to experience a fall that may be steep or mild. They are also correct in their opinion due to their specific study.

Pigs

Pigs are high risk investors who have avarice for short term profits and are ready to lose sleep.

Chickens
Chickens are tender and low risk investors who find it hard to lose their hard earned money and are afraid of investing.

Written by Jesus Smithston. Wondering which form of financial asset will provide you maximum income to achieve financial freedom? At The Team Wealth Builder Forums you can learn about the best investment to make sustainable money that will work for rest of your life. Log on to TeamWealthBuilder for expert tips regarding wise investments to get out of the rat race and become financially free.

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