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Stock(s), what are they?

  • STOCKS are ownership in a particular company

  • A stock is sold in units which are individual SHARES

  • If you own a share of a company, you are what they refer to as an SHAREHOLDER

  • Persons use do be issued on paper certificates, today almost all are delivered electronically

Companies are mostly divided into millions of shares and higher, some as high as hundreds of millions of shares. When a company decides to go public (sell shares), that event is called an Initial PublicOffering (IPO). Companies offer their shares to the public to raise money to:

  • expand ,

  • purchase other companies

  • Purchase inventory

  • Hire more employees

  • Decrease debt

There are two types of stocks:

  • Common: this version of stocks allow the shareholder to to vote and shareholder meetings and receive dividends.

  • Preferred: These members that hold these types of shares dont have the right to vote, however they still receive dividends. They also have priority over the common shareholders, should the company run into hard times and have to file for bankruptcy and the assets have to be sold.

The common and preferred stock fall into one or more of the groups below:

  • Growth Stocks: Theses stocks have earnings that grow alot faster than the stock market average. Most of these do not pay any dividends and most investors purchase this type to hopefully get capital appreciation

  • Income Stocks: This type of stock pays its shareholders dividends consistently. Most investors purchase this type for the income that they generate

  • Value Stock: These stocks ave a low price-to-earnings (PE) ratio, this simply means they are cheaper to buy than other stocks with a higher PE. Now, value stocks may be growth or income stocks. People sometimes buy these value stocks hoping that market will allow then to once again hit new highs.

  • Blue Chip Stocks: These are shares in large well-known companies with long history of growth. Theses generally pay dividends as well.

There is also another way to categorize the stocks by the size of the company itself. There are large-cap, mid-cap, and small-cap stocks. There are also a really small cap stocks which are called micro-cap. Penny stocks, are the lowest priced stocks . They little to no earnings, they pay no dividends and are highly speculative.

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