Stocks Trading – What Are the Basics?
The term stocks is not limited to any particular industry or country. It generally refers to any shares of stock in a company that are listed on the stock market. Stocks come in different forms, such as common stock, preferred stock, etc. The most familiar form is the penny stock. Penny stocks are seen as high risk investments, but they can also offer large returns. Research should be carried out prior to buying stocks.
Stock is basically all the stocks held by an organization in proportion to their value. In American English, all the stocks are collectively referred to as’stock’. A single share of stock constitutes fractional ownership in whole percentage of that companies stock in proportion to its value.
Investors in the United States have the right to buy and sell stocks through over-the-counter trading system or the NYSE (New York Stock Exchange). Over-the-counter trading system provides investors with lower costs compared to the direct trading system. Companies usually offer new shares via their respective board of directors, from the company’s management team or the company’s attorney. New stocks are listed in the company’s stock exchange. Prior to the listed transaction, it is usually required that an investor have held an account with the company for a minimum of six months.
New stocks are issued throughout the year. During the first few weeks of each year, a company will issue new shares to all its existing stock holders. Once all the outstanding shares have been sold, then that company will become “out of business” and all the old shares will be cancelled. This is how a company keeps stockholders satisfied and maintains shareholder’s equity. After all the outstanding shares have been cancelled, then the company becomes “out of business” and must find new owners.
Growth stocks are generally viewed as long term investments. The typical stocks that are classified as growth stocks are those that show the potential for greater profit and dividends. These types of stocks have a low share price and have the ability to grow slowly over time. As the price of these stocks increase, so does the investors equity and the possibility for profit increases as well.
Blue-chip stocks, on the other hand, are considered to be very safe investments because of their high dividend payments and limited number of shareholders. Blue-chip stocks are usually issued by well known companies that are stable and profitable. The most popular blue-chip stocks are stocks that pay very high dividends. One should only invest in blue-chip stocks if they have a significant amount of experience in dealing with stocks and a good understanding of how the stock market works.