Learning About Stock Markets and Increasing Your Profit

stock market investingMost beginner investors are confused by the various sorts of stock. This confusion turns away people from the stock market altogether, or to make unwise investments, as they find it hard to pick stocks to buy. If you are going to play the stock market, you must know what types of stock are available and what it all means!

What Is Common Stock?

Common Stock is something that you will hear many times. Anybody can buy common stock, irrespective of income, age, or financial standing. Common stock is essentially part ownership in the business you put your money in. As the business grows and earns profit, the price of your stock increases. On the other hand, if the company does poorly or goes bankrupt, the value of your stock falls. Holders of common stock do not take part in the daily activities of a company, but they have the power to elect the board of directors.

What are the different Classes?

There are also various other classes of stock along with common stock. These various classes of stock in one company are often called Class A and Class B. The first class, class A, essentially gives more votes to the stock owner per share than that to the holders of class B stock. The capability to create different classes of stock in a corporation has existed since 1987. Many investors avoid buying stocks that has more than one class, and stocks that have more than one class are not called common stock.

There is Preferred Stock

The most upscale type of stock is Preferred Stock of course. Preferred stock isn’t actually a stock. It is a combination of a bond and a stock. The owners of preferred stock can lay claim to the assets of the company if bankruptcy occurs, and preferred stock holders get the company’s proceeds of the profits before the common stock owners. If you think that you may prefer this preferred stock, be aware that typically the company is entitled to purchase the stock back from the stock holder and discontinue paying dividends.

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