There are many who are interested to enter the stock market and are aware of the negativity that surrounds it. The truth is that only a handful is able to get good profits from this highly volatile market, while the majority ends up in losses. It is for this reason, a good number of people take the wise decision to join online or offline stock training classes to become experts in the domain. It is important for all stock brokers to be aware of what stocks are all about and its different types, how it is to be purchased and sold.
What is a stock?
The share is considered to be the smallest ownership unit in the organization. Owning even a single one, the person is regarded to be that company’s part owner. One major reason for the company’s original owners to sell stocks to the public is to gather more funds for smooth operation and implementation of new projects and further expansion into the market. The money derived is then invested to make profits, part of which is then distributed among the share investors. Once the initial stocks are sold, this same stock can be sold in the market again.
The company’s performance also directly affects the stock prices and value. Good performing companies or those showing promise will enjoy favorable public perception. Its stock value is likely to increase, which is great news for the stock holders having investments in the stocks of his company. But stocks of poor performing companies are likely to depreciate in value, thus making the stock trader holding this company stock to lose good amount of money very quickly than imagined. Unless devalued stocks are sold, the stock holder will not lose money as it might bounce back sooner or later.
Know the stock types
- Common stocks: It represents the stock majority that is purchased by the public. The person owning this stock tends to have the right to vote as well as to receive dividends. But this stock is prone to going ‘up’ or ‘down’, depending upon domestic and global market situation.
- Preferred stocks: The holder of such stocks is not entitled to vote, but can receive dividends much before the other stock holders. Convertible type allows conversion to common stocks from preferred stocks.
Stock selling and buying
Several ways do exist to purchase or sell stocks. One has to seek the services of an authorized stock broker to carry out stock trading. There are different types of stock brokers in the market.
- Full service brokers: These brokers can provide expert advice on the latest stock market movement and trends, including personalized service. However, they are expensive.
- Discount brokers: They provide no or very little market advice, usually on the stocks put up for sale. They are more affordable.
- There are financial institutions like credit unions or commercial banks that function as discount or full service broker.
It is only the knowledgeable and smart trader who can reap in the profits from stock trading and also use online Best Trading Account in India.