finance@mydigonto

Stock/Share In financial markets, stock is the capital raised by a corporation or joint-stock company through the issuance and distribution of shares. A person or organization which holds at least a partial share of stocks is called a shareholder. The aggregate value of a corporation’s issued shares is its market capitalization. In the United Kingdom, South Africa and Australia, the term share is used the same way.

Types of Stock

Common stock

Common stock, also referred to as common or ordinary shares, are, as the name implies, the most usual and commonly held form of stock in a corporation. The other type of shares that the public can hold in a corporation is known as preferred stock. Common stock that has been re-purchased by the corporation is known as treasury stock and is available for a variety of corporate uses. Common stock typically has voting rights in corporate decision matters, though perhaps different rights from preferred stock. In order of priority in a liquidation of a corporation, the owners of common stock are near the last. Dividends paid to the stockholders must be paid to preferred shares before being paid to common stock shareholders.

Preferred stock

Preferred stock, sometimes called preferred shares, have priority over common stock in the distribution of dividends and assets. Most preferred shares provide no voting rights in corporate decision matters. However, some preferred shares have special voting rights to approve certain extraordinary events (such as the issuance of new shares, or the approval of the acquisition of the company), or to elect directors.

Dual class stock

Dual class stock is shares issued for a single company with varying classes indicating different rights on voting and dividend payments. Each kind of shares has its own class of shareholders entitling different rights.

Treasury stock Treasury stock are shares that have been bought back from public. Treasury Stock is considered issued, but not outstanding

Shareholder A shareholder (or stockholder) is an individual or company (including a corporation) that legally owns one or more shares of stock in a joint stock company. Companies listed at the stock market are expected to strive to enhance shareholder value. Shareholders are granted special privileges depending on the class of stock, including the right to vote (usually one vote per share owned) on matters such as elections to the board of directors, the right to share in distributions of the company’s income, the right to purchase new shares issued by the company, and the right to a company’s assets during a liquidation of the company. However, shareholder’s rights to a company’s assets are subordinate to the rights of the company’s creditors. This means that shareholders typically receive nothing if a company is liquidated after bankruptcy (if the company had had enough to pay its creditors, it would not have entered bankruptcy), although a stock may have value after a bankruptcy if there is the possibility that the debts of the company will be restructured.

Stock exchange A stock exchange is an organization that provides a marketplace for either physical or virtual trading shares, bonds and warrants and other financial products where investors (represented by stock brokers) may buy and sell shares of a wide range of companies. A company will usually list its shares by meeting and maintaining the listing requirements of a particular stock exchange and the different.

Buying stock

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. Most trades are actually done through brokers listed with a stock exchange.

Selling stock

Selling stock is procedurally similar to buying stock. Generally, the investor wants to buy low and sell high, if not in that order (short selling); although a number of reasons may induce an investor to sell at a loss, e.g., to avoid further loss. 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, discount or full service, handles the transaction. After the transaction has been made, the seller is then entitled to all of the money. An important part of selling is keeping track of the earnings. Importantly, on selling the stock, in jurisdictions that have them, capital gains taxes will have to be paid on the additional proceeds, if any, that are in excess of the cost basis.

Stock price fluctuation

The price of a stock fluctuates fundamentally due to the theory of supply and demand. Like all commodities in the market, the price of a stock is directly proportional to the demand. However, there are many factors on 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 Broker

A transaction on a stock exchange must be made between two members of the exchange a typical person may not walk into the Stock Exchange, and ask to trade stock. Such an exchange must be done through a broker. In addition to actually trading stocks for their clients, stock brokers may also offer advice to their clients on which stocks, mutual funds, etc. to buy.

Mutual Fund

A mutual fund is a form of collective investment that pools money from many investors and invests their money in stocks, bonds, short-term money market instruments, and/or other securities. In a mutual fund, the fund manager trades the fund’s underlying securities, realizing capital gains or losses, and collects the dividend or interest income. The investment proceeds are then passed along to the individual investors. The value of a share of the mutual fund, known as the net asset value per share (NAV), is calculated daily based on the total value of the fund divided by the number of shares currently issued and outstanding. In simpler terms, a mutual fund is nothing more than a collection of stocks and/or bonds. You can think of a mutual fund as a company that brings together a group of people and invests their money in stocks, bonds, and other securities. Each investor owns shares, which represent a portion of the holdings of the fund. You can make money from a mutual fund in three ways: 1) Income is earned from dividends on stocks and interest on bonds. A fund pays out nearly all of the income it receives over the year to fund owners in the form of a distribution. 2) If the fund sells securities that have increased in price, the fund has a capital gain. Most funds also pass on these gains to investors in a distribution. 3) If fund holdings increase in price but are not sold by the fund manager, the fund’s shares increase in price. You can then sell your mutual fund shares for a profit.

Source: Wikipedia, Internet