Stocks have been the greatest financial tools of an investor’s
portfolio that can generate quick income as you sit back at home. These
financial instruments have a large bearing on an investor’s money making
expedition. With the passage of time common people have entered into the
market in a big way and the market is no more a playground for the rich
only. Moreover technological revolution and the demand and supply of
stocks have made it possible for every single person to own them in their
portfolio.
As more and more people enter into this marketplace the need to
understand the markets and the actual nature of stocks has come in. Though
people trade these financial instruments daily, their understanding of
stocks is a little weak.
STOCKS
A stock is a share in the share value or the ownership of a company.
It symbolizes a claim in the asset value of the company as well as in
its earnings. Bigger the holding, greater the share a person has in the
particular company. It doesn’t imply that if a person has the stocks of
a company he can make the management dance to his tunes. It is only
large investors who have a huge amount of holdings who can actually have
an influence on the management and can command a hold over the company
in case the company goes bankrupt.
However stocks may or may not be paid dividends at the end of the
financial year. Some companies pay dividends while some don’t. There is
however no compulsion to pay them. Apart from dividends stock trading is
the only way to earn a lump sum.
Types Of stocks
1. Equity or common stocks- These may be obtained in the form of
initial public offers and may earn dividend at the end of the financial year.
They have voting rights.
2. Preference stocks- These stocks are given a preference in the
dividends and do not carry any voting rights.
3. Debentures- Debentures are loan money taken by the company to raise
its capital. They are paid interest at par with the bank rate.
How Stocks Trade
Stocks trade on the stock market usually through a broker. A person can
ask him for the shares he wants to purchase and the broker arranges
them. He takes a minimum commission for every transaction.
However these days’ stocks are increasingly being traded on the
internet. So almost all stocks a person wishes to possess are available on the
internet.
Why Stocks fluctuate in price
1. Demand
2. Supply
3. Dividend declaration
4. Non declaration of dividends
5. Media speculations
6. Management decisions
7. New projects of the company
8. Mergers and acquisitions
9. Financial year profits declaration
Stock Market Participants Bulls
Bulls are those traders and investors who believe that the stocks are
going to rise. They see some possibility of a rise in various stocks of
companies.
Bears
Bears are those market people who believe that stocks are going to
experience a fall that may be steep or mild. They are also correct in their
opinion due to their specific study.
Pigs
Pigs are high risk investors who have avarice for short term profits
and are ready to lose sleep.
Chickens
Chickens are tender and low risk investors who find it hard to lose
their hard earned money and are afraid of investing.
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