Investing in the Stock Market – What You Need to Know
Stock is simply all the stocks owned by an owner of a company. In American English, the stock is collectively referred to as “stock”. Each share of stock represents a fractional ownership of a corporation in ratio to the total number of outstanding shares. This means that a shareholder is entitled to dividends only if the corporation receives a cashier’s check for that dividend instead of a stock dividend.
The primary source from where most stocks are listed is the New York Stock Exchange (NYSE). Other exchanges also exist but are less prominent such as the NASDAQ and the London Stock Exchange (LSE). These secondary sources list stocks not traded on the NYSE or NASDAQ. One can buy or sell shares directly from these stock exchanges. There are other ways to buy and sell the securities however, which include trading on the major stock exchanges such as NYSE, NASDAQ and LSE.
The major stock exchanges differ in terms of pricing, accessibility, list and volume of stocks and other market information. The New York Stock Exchange for instance, offers direct trading between investors. Some other stock exchanges such as NASDAQ work with brokerage firms who facilitate direct trading between investors. The LSE and the London exchange, however, work with banks as well as individuals to facilitate direct trading between buyers and sellers.
Types of Securities – Common Stock and Preferred Stock
Types of Securities – Common stocks are normally available to all US citizens regardless of age, while preferred stocks are restricted to particular account holders. These stock exchanges allow the buying and selling of securities in numerous types. Dividends are usually paid to the shareholders on a regular basis, although some companies pay dividends quarterly or annually. The sale of common stock is also done through broker dealers. The major types of securities include stocks, preferred stocks, debt securities, mortgage-backed securities and asset-backed securities. Examples of common stocks are treasury bills, preferred stocks, issue trading stock, common stock certificates and new issue trading stock.
The purchase and sale of preferred stock are considered as an attractive option for many investors. It involves lesser risks than buying common stock. However, if you want a chance of gaining huge returns in lesser time, then it is advisable to buy preferred stock. You can invest in the preferred stock for as long as you want and can afford to wait for a considerable period. You may sell your preferred stock at a later date if you think that the market conditions have changed drastically and you require higher returns.