We have all at some point of time heard of the word stocks yet we when asked about the same we seem to have a basic idea or a in most cases no idea at all .
What is Stock in relation to a share market ??
A stock is the share in the ownership of the company. Most of the major company’s cannot just start-up a venture with capital they need investors so in order to have more funds a company relies in its investors. So when you invest for a share in the company you end up having a stake on ownership. That means whenever the company receives a profit you will receive a part of the profit known as dividend. There are two times of stock namely the common stock and the preference stock the common stock as the name suggests is the most common option because not only does it benefit the investor by higher returns but also have a say on board of directors by the company i.e they get one vote per share to elect the board members whereas preference stock holders represent a degree of ownership in other words they have a minor stake on ownership another advantage is that preference stock holders have a guaranteed dividend and in case a company incurs a loss they are the first ones to be settled i.e. after the debt holders but before the common stock holders.
How stocks trade ??
An easy way to understand this is that every share has a price and that depends on various factors affecting the economy. Stocks can be traded on exchanges which can be physical or virtual. Stock market is where one exchange entity facilitates the exchange of Securities between buyers and sellers. Major stock exchanges include –NYSE,NSE, BSE and many more