What is ‘share’?
Share is a small unit of company ownership, this can provide equal partnership in case of profit in the form of increase in price and dividends. These are also refer to stocks. In other words this is the ownership relationship between shareholder and company. Companies offer shares to rise capital. Companies issue shares as IPO (Initial public offering) this is the primary market.
Usually the denominated value of each share is face value. Total number of face value of shares is the capital of the company. Usually companies rice IPOs in bull market. Capital raised through stocks will used for business expansion.
Nowadays stocks are coming as dematerialized or electronic form rather than paper form. In other words each and every stock is in electron form.
Types of stocks
- Common stocks.
- Preferred stocks.
These are the stocks are most common stocks issued by the company. Any persons can by these stocks. Common stock holders have voting power, very volatile in the market. In other words these are very sensitive to economic conditions. These stack holders make money by capital gains and dividends. Usually these type of stock holders receive less amount in terms of dividend compare with preferred stock holders.
These stocks are less volatile compare to common stocks. These are not easily available for all the individuals. These stock holders don’t have voting power, but direct claim to company’s assets. These people will receive regular dividend before common stock holders. Company can buy back preferred stocks at anytime for any reason at favourable price.
However higher rate of returns involves higher risks. Common stocks and preferred stocks have their own ups and downs. One should do lot of analysis before investing in stock market. Also lot of paper work required and expert advice is better for beginners.