What is a stock

Stock is a financial instrument that represents a fraction of ownership in the company. The stockholder owns a fraction of the assets and profits of the company. The amount of stock you own is equal to the fraction of ownership of the company. Stocks is raised to fund business operations. A portion of stocks is called shares. There are two types of stocks: preferred and common stock. Shareholders get a part of companies earning as dividends. Other privileges come with owning a stock, like dividends, decision making, etc.

You can primarily exchange stocks in the stock market, and there is an option of a private sale. All the transactions are being governed and regulated by the company to protect traders from fraud and scams. In addition, you can buy stocks from an online stockbroker. These investments surpass other investments in terms of performance.

A shareholder owns the asset(stock) of the corporation and not the corporation itself. But the law treats corporations differently because corporations are considered as a person. So corporations can borrow money, file taxes, own property and can be sued. Corporations own the assets. Corporations own the chairs and tables in the corporate office, but corporations do not own shareholders.

How to Buy Stocks?

Stocks are exchanged in NYSE and other markets of the world. The company offers an initial public offering. Then stocks are available to buy and sell. Sell price and purchase price(bid) and sell(offer) on the exchange, and investors can purchase stock using a brokerage account. The prices of stocks is influenced by demand and supply. It is a small summary. Let’s discuss all the steps to buy shares:-

Step1:- Research all the stocks in the market and select the suitable stock according to your trading plan, and the research will include technical analysis and reading charts like a candlestick.

Step 2:- Decide whether you want to buy or sell the stock. If the price increases, you have to purchase stock, and if the price is falling, you sell stock. 

Step 3:- Choose the amount of CFD you want to trade. 1 CFD is equal to 1 share. Choose the number of shares according to your trading goals and plans.

Step 4:- Put a stop loss to limit the amount of loss if the trade moves against you. You should take risks according to your limit, trading plans and goals. 

Step 5:- Now, you have to observe the level of your position. Your trading platform will indicate profit or loss on the top corner. You can exit the position after clicking the close trade button.

Types of Stock:-

There are two types of stocks:- common stocks and preferred stocks. Let’s discuss both types and their features:-

• Common stock:

Common stocks are types of stocks where you can buy and sell stocks, commonly as the name suggests. You get a share of profit and a right to vote. The companies also provide dividends, and the payment is made regularly, but dividends vary, and it is not guaranting. 

• Preferred stock:

 Preferred stocks are types of stocks where dividends is fix. As the name suggests, dividends are first given to preferred stockholders and then common stockholders that include the time of liquidation during bankruptcy. In addition, preferred stocks are less volatile than common stocks, meaning the level of losses and profits will be low. As a result, preferred stocks are suitable for the long term.

Difference between preferred vs common stock:

Let’s discuss the difference between common and preferred stock and find out which one is better for you:-

• Dividends:- Dividends are lower, and it is not guaranteed in common stocks, but Dividends are fixed, guaranteed and higher in preferred stock. 
• Voting Right:- Voting rights are available for common stocks but not in preferred stocks. 
• Long term:- The long term growth in common tern is higher, but it is lower for preferred stocks.
• Volatility:- The volatility in common stock is higher, while preferred stock is safer because it is less volatile. 
• Recovery:- The recovery after bankruptcy is possible in preferred stocks. It means that a part of investments will recover. In contrast, common stocks can’t recover after companies bankruptcy. It means that you will lose investments after companies bankruptcy.

Conclusion:

Companies are assets of the company. Stock is issue to collect funds to execute companies functions. Those having a stocks are known as stockholders, and they have a part in the investment. The company offers dividends, part of companies earning and voting rights to the stockholder. The part of the stock is called shares. There are 5 simple steps to buy stocks: research, the decision regarding buy/sell and the amount of stock, Setting up a stop loss, monitoring and selling stocks. There are two types of stocks preferred and common stocks with their features and perks. Overall it’s easy to buy and sell stocks, but there is a high brokerage problem that can be solved by trading with brokers like HFTrading.