What is a Stock?

What exactly is a stock you ask?

Well, a stock is a certificate that shows that you own a small fraction of a corporation. When you buy a stock, you are paying for a small percentage of everything that that company owns; buildings, chairs, computers, etc.

As a part owner of the company, the amount of stock that you own determines the amount of ownership that you have.

For example, if a company has 10,000 shares of stock outstanding and one person owns 100 shares, that person would own and have claim to 1% of the company’s assets. The benefit of owning stock in a corporation is that whenever the corporation profits, you profit as well. Therefore, the risk is that the company could do poorly or even go bankrupt (normally not a good thing for stockholders).

There are two main types of stock: common and preferred…

  1. Common stock usually entitles the owner to vote at shareholders’ meetings and to receive dividends.
  2. Preferred stock generally does not have voting rights, but has a higher claim on assets and earnings than the common shares. For example, owners of preferred stock receive dividends before common shareholders and have priority in the event that a company goes bankrupt and is liquidated.

A few notes on stocks:

  • Although they are potentially riskier than some other investments, a key benefit is that stocks have no limit to how high they can go in price. The most you can lose is the amount you invested.
  • Historically, stocks have outperformed most other investments over the long run.
  • You can now purchase most stocks at many online brokers for under $10 a trade and some online brokers offer free online trading.











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3 Comments
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  1. Hi,you mentioned some other form of investment after from stock purchase,can you pls throw more light on those?

    Secondly,how can one purchase preffered stock?is it through the stockbrokers or one needs to visit the company and discuss it?

    Lastly,does it require a huge amount to set up?

    Thanks in anticipation and it is good that you’re giving christains quality info thru your blog,pls keep it up.

  2. Bola,
    Sorry, but I am not sure what you are referring to in your first point. But for the second one, you can purchase preferred through any of the larger brokerage firms. The smaller ones may or may not trade it. And for your 3rd point, I am assuming you are referring to the free online trading link. If so, that is for Zecco.com, who used to have a $2500 minimum to open an account, but now have lowered that to $0. Yes $0 minimum. Not a bad deal.

  3. MAHAMADOU KEBE

    HEY THANK YOU VERY MUCH FOR ALL THE INFORMATIONS IT IS VERY SIMPLE THAN I THOUGHT BUT I DO HAVE ONE QUESTION IM NOT A US CITIZEN IS IT POSSIBLE FOR ME TO BECOME AN INVESTOR IN THE US MARKET ALSO IS THERE SOME PLACES TO TAKE INVESTMENTS CLASSES. AGAIN THANK YOU VERY MUCH FOR ALL THE INFORMATIONS .

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