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What Are Shares ?

Make Money From Shares

13th  Sept 2012

What Are SharesIf you are searching for opportunities to make money , you would probably have heard of the share market. In layman’s term, it is a place where shares or stocks are bought and sold. The first step for anyone wishing to take this road to riches is to understand stocks.

The smallest unit of ownership in a company is a share of its stock. Owning a share of a company’s stock means you are a part owner of the company. 

As a part owner of the company you have invested in, you are also given the right to vote on members of the board of directors to look after your interest in the company.

The advantage of ‘owning’ a company this way is the notion of limited liability. Should the company loses a lawsuit and must pay a big judgment, the creditors cannot go after your personal assets, unlike being a partner or owning your private-held companies.

Type of stocks

There are two types of stock ,namely common stock and preferred stock

Most of the stock held by individuals is common stock.This represents the majority of stock held by the public. It has voting rights and the right to share in dividends.

Preferred stock on the other hand has fewer rights than common stock. However, preferred stocks have the advantage of dividends payment on a more consistent basis. And if dividends are to be issued, preferred stock has the first call over common stock.

Investors like to classify stocks by type of business and group them under different sectors. This helps them to put the various companies in similar industries together for comparison purposes and to diversify their portfolios. A diversified portfolio take advantage of short term gain from market changes and protection from major market swing.

How do you make money from stocks?

Make Money From StockAs a part owner of the company which you had bought stocks, you are then likely to receive a proportionate share if the company distributes profits to shareholders.

The other way of making money with stocks is to sell at a price higher than the price you bought. That is to buy low and sell high. The knife cut both ways here. You can lose too when you sell lower than what you have bought.

In short, you make money from the dividends issued by the company you invested in as well as when you sell your stocks at a higher price than you had bought.

It has to be emphasized that it takes more than just understanding the fundamental of stocks to make some money out of it. Many got their hands burnt making the wrong investments while there are many too who make big fortunes out of it.



Related Articles :

What Are Shares Classification

What Is Share Market?

Stock Investment For Beginners

How To Pick Your First Stock ?

Make Money From Stock



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