The very basic question an investor always has is what is stock?
The term stock is also used to mean the ownership shares of a corporation. in simple words, if you hold stocks of a company then you own part of a company. There are various types of stocks mainly categorized into 2 parts
- Common stocks
- Preferred stocks
Let's look at them what they actually mean
Common stocks
Common stock is a security that represents ownership in a corporation. Holders of common stock exercise control by electing a board of directors and voting on corporate policy. Common stockholders are on the bottom of the priority ladder for ownership structure; in the event of liquidation, common shareholders have rights to a company's assets only after bondholders, preferred shareholders and other debt holders are paid in full.
Preferred stocks
A preferred stock is a class of ownership in a corporation that has a higher claim on its assets and earnings than common stock. Preferred shares generally have a dividend that must be paid out before dividends to common shareholders, and the shares usually do not carry voting rights.
Preferred stock combines features of debt, in that it pays fixed dividends, and equity, in that it has the potential to appreciate in price. The details of each preferred stock depend on the issue.
So what is the conclusion? for general public, you don't need to worry about the stock type as you will not hold a major part of any company(unless you are a millionaire- in that case you will not be reading this blog :P). You will hold the common stocks. You are a part of the company of which you are holding the stock but you don't have a say how the company is running on a day to day basis. The company will be run by the company board of directors, they will appoint CEO,COO etc to run the company.
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