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A stock is a certificate that
shows that you own a small fraction of a corporation. When you buy a stock,
you are paying for a small percentage of everything that that company owns,
buildings, chairs, computers, etc. When you own a stock, you are referred to
as a shareholder or a stockholder. In essence, a stock is a representation
of the amount of a company that you own.
The benefit of owning stock in a corporation is that whenever the
corporation profits, you profit as well. For example, if you buy stock in
Coca Cola, and they come out with a new drink that everyone buys in massive
quantities, then the company will profit tremendously, and so will you. A
stock also gives you the right to make decisions that may influence the
company. Each stock you own has a little bit of voting power, so the more
stocks you own, the more decision making power you have.
In order to vote, you must either attend a corporate meeting, or you fill
out a proxy ballot. A proxy ballot is a "subsitute" for your absence at the
corporate meeting. A ballot is a series of proposals that you may either
vote for or against. Common questions are who should be on the board of
directors, and whether or not to issue additional stock. You can profit more
by making smart decisions, such as voting for a smarter board of directors.
Also, if you think that issuing additional stock may increase the value of
the stock, then you would vote for issuing additional stock.
There are four levels of stock you can purchase. The lowest level of stock
are the penny stocks. Penny stocks are small companies that have almost no
chance of making it big, and they are usually of no value. These stocks
could be a local chain of stores, or a company that does not provide
anything desirable.
Moving up one level, there are the growth stocks. Growth stocks are new
companies that have a lot of potential for success, but they are not stable,
and do not always become successful. These growth stocks are not always a
safe investment, since they are not well- established. Secondary issues are
well- established businesses that are almost totally insured to continue
growing in strength. They are a good investment, since the profit can
increase a lot, but finding the companies can be hard. The highest level of
stocks you can buy are blue chip stocks. The older companies usually are
blue chip, such as International Business Machines (IBM) and AT&T, and Coca
Cola. These blue chip stocks are the safest investment you can make, but
they also take a lot more time to profit with.
If you want to profit from buying a stock, you must decide on a successful
company to invest your money in. There are many factors about the company
you have to base your decision on. By analysing all of the aspects, you have
a better chance of predicting whether or not the stock will rise in value.
Some questions to keep in mind are :
How much profit has the company made recently? If the company has not
recently made a lot of profit, chances are it may never profit, and it is
not a good idea to invest in it. If the company has made a lot of profit
recently, then it may be a good investment, since the profit may continue to
rise.
Is the product or service provided popular and in demand? If the company
offers an undesirable product, then the company may fail, since no one will
buy from them. If the company dies, then you suffer massive losses, so you
do not want to invest in companies with an undesirable product or service.
You want to invest in a company with a service or product that is in high
demand. If a company invents a new kind of food that is incredible, and
everyone wants tons of it, then you can profit greatly, since the company
will make tons of profit.
Is there a lot of close competition? If the company is the only company that
offers something, then everyone has to buy from that company, meaning the
company will grow larger, and profit a lot. For example, if there was a
company called Sneakies and it was the only company to offer sneakers, then
everyone would be forced to buy from them, and that would result in huge
profits for Sneakies. In real life, though, there are big time competitors,
such as Nike and Reebok. Therefore, Sneakies would not make a whole lot of
profit, and neither would you.
Stock analysts regularly get the answers to these questions, and many others,
and make predictions about the stocks value in the future.
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