Investing in Common Stocks (Part 1)

Successful investment in stock market requires an understanding of the different characteristics and features of the stocks. It is important to learn some basic knowledge about what common stocks is, how many types of stocks have, what causes stock prices to change and many more.

Common stocks are the most common form of stocks an investor will encounter in the financial market. It represents a certificate of ownership of a company. Common stock has two important features - Limited liability and liquidation rights:

Limited Liability:

Common stockholders have limited liability, in other words, their liability is limited to those stocks. They cannot be forced to pay anything out of their own money in the event of bankruptcy. They are fully protected against any financial obligations incurred by the organizations.

Liquidation Rights:

If a company goes bankrupt and liquidates all its assets, the common stockholders have the right to receive their share of sale proceeds. However they are the last to receive money after the creditors, bondholders and preference stockholders are paid.

Please visit the relevant guides to learn more interesting and useful stuff about finance investment and stock investment.

The author, Loke Yuen Wong, holds an MBA from Heriot-Watt University (UK) and a BCom degree from The University of Adelaide (Australia).