A Guide to Investing in Stocks
Stocks are all the stocks owned by a company to which ownership of that company is limited. In American English, the stocks are collectively referred to as ‘stock’. Each share of stock represents fractional access to the company in percentage to the total amount of shares outstanding. Stock may also be called ‘equity’. The different types of stocks are common stock, preferred stock, common stock dividends, treasury stock and treasury notes. In the United States, the common stocks are known as ‘blue chip’ stocks.
In general, investing in stocks means obtaining knowledge about the stocks that are available for purchase and determining whether those stocks represent a good investment opportunity or not. An important factor for investors in the stock market is to determine their risk tolerance. Investors must assess the possibility of obtaining returns they can count on, and their ability to bear losses if that chance should arise. Some forms of trading involve using margin accounts, which allow the individual to obtain additional funds to invest in stocks if they are unable to get in front of their trades.
Once an investor has selected stocks that interest him, he proceeds to buy a number of units representing that stock in order to issue new stocks. When an investor sells his units, he receives cash. The profits from the sale of these stocks, along with the dividends received, are what remain after the initial costs of purchasing the units. An investor may choose to invest in mutual funds which pool stocks from several companies. A stockbroker keeps track of stocks for you, just be certain to inform him if your portfolio contains stocks held by entities other than the ones you want to track.