Investment 101: What Are Stocks Anyway?

Investment 101: What Are Stocks Anyway?

If you've been considering getting involved with day trading strategies and stocks for some time now, then the first thing you'll need to do is invest in a full and comprehensive education. A lot of people say that they want to invest simply because they've heard that they are one of the most common vehicles for making money in the financial market. However, when it gets down to it, these people don't know what they are, or which kind of shares they can invest in. Before you get caught up looking at things like stock market news and day trading strategies, or even the ins and outs of after-hours trading, let's start with the basics and cover exactly what stocks are.

Investing

For decades, investing in "stocks" has been one of the best ways for people to build capital and accumulate wealth. If you're a lucky person with passive income to work with, then investing is the best way to use your money to make more cash. After all, today's savings accounts rarely offer much in the form of interest. However, most remain confusing concepts to the majority of people - including those who invest as part of their retirement plan. You can even invest after the official market hours using a strategy called "after hours" trading if the general market times don't work for you.

It's easy to look at stocks as a confusing concept meant only for people who have a strong background in financial investment. However, the truth is that virtually anyone can invest these days thanks to online trading forums. What's more, a well-chosen selection can be a great way to give yourself financial freedom.

The Different Kinds

In the financial world, a stock is a share of a business or a piece of paper that represents your ownership of a small portion of a company. Corporations of all shapes and sizes issue stocks to raise money for their companies. Sometimes, people refer to as equities because they represent ownership of a business or securities.

There are two common types that might appear in your investment portfolio. Common shares are that most people are talking about when they're discussing investment opportunities. Common stock is entitled to a proportionate amount of the losses or profits of a company. For instance, if you owned enough stock in a company that you could claim that you owned 30% of that business, you would be responsible for winning and losing 30% of the money that the firm earned or lost. Common stocks can also raise money through "dividends" paid to the people who own the stocks over time.

Preferred stocks are the other kind of capital available in the financial market. Shareholders with preferred will receive a dividend at specific times during the year. Usually, the dividend for preferred shares need to be paid before any of the common stockholders can receive those dividends. Additionally, if something goes wrong and a business ends up going bankrupt, the holders of the preferred will receive their money first, before anyone else, making a preferred a less risky investment.

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