The most basic form of investing is through purchasing company stocks (shares). In this post we will go over the basics of stocks, what they are, their valuation and categories of different stocks.
To start off, a stock is simply a share in the company (considered an equity), you purchase a stock in hopes that a company will perform well and the value of your shares will increase so you can sell for a profit. But before we get into stock picking and the fundamentals behind it lets take a look at what a stock is.
A Stock = Equity portion or Share of a company. Therefore you will participate in the profits and loses of the company.
Types of stocks:
– Common stock – Majority of stocks issued today are common stocks, this type of stock will give the shareholder voting rights and in some cases even a dividend though not guaranteed.
– Preferred stock – are not as common, these guys will guarantee a dividend but unlike common shares they do not come with voting rights.
Stocks can come in all different shapes and sizes, though the above mentioned are the most common of the lot so we will focus on these for now.
When looking at any particular stock you will run into endless abbreviations. So to help you understand what these are, We will give you a cheat sheet for what these abbreviations stand for and what they are exactly. However we will write another post down the line to explain how these ratios should be looked at and what their numbers mean for your stocks.