Stock ownership details

When you purchase a share of stock in a company, what exactly are you receiving? Every company, or person(s) who are going to start a new business are in need of money. They need to buy materials, to rent space, to advertise, to build a factory and so on. So, there are two legal ways a company can raise money needed to accomplish their goals. They can borrow the money from the bank, or they can start selling shares (fractions) of their company promising the dividends to their shareholders (investors). A shareholder could be a person or a company who bought one or more shares. The stock of the company is divided into many “pieces” and if we collect all “pieces” we will get the whole stock (also known as capitalization). He who has at least 51% of the stock is in control of the company. They are called a controlling shareholder. The other shareholders are more limited in their rights. Nevertheless, when someone buys a share he becomes, so to speak, a co-owner of the company, to some extent, complying with the rules and regulations of the company. There are different types of shares with different rights and restrictions, and this is why not all shareholders have the same rights or privileges. Some of the different types are restricted shares, authorized shares, and float shares. Every shareholder get dividends (a percent of the companies profit). The Board of Directors declares dividends, or the amount each shareholder receives.

In truth, the stock market is associated with a great confusion for many of us. Some people may think that investing is something like gambling and it is more likely that if you start gambling (investing) you will eventually lose. This kind of attitude is often based on a personal experience or on the stories heard from the relatives and friends. Some other people just buy shares as the masses do, not analyzing the situation before buying. As their knowledge may be shallow, they are more driven by emotions and blind faith in a nice idea to invest for the “long-run”. This can often lead to poor results and subsequent frustration.

It is a good thing to have a savvy broker, but it’s even better to gain a personal understanding of the matter. It is necessary to know about the company as much as possible, to evaluate the balance sheet, and to know the real value of the company and its stock. If you or your broker analyze the investment opportunities with time and care, then there is a good chance you will see success over the long haul.

When a new company is developing and growing, the shares of the company are getting more valuable and it draws new investors to buy the shares. This makes your shares more valuable as growth of the company is strong. Another way to invest is to look for are companies with a good history of paying dividends. These companies are usually stable and profitable, though they cannot offer much in regards of their potential growth because they have been in existence for some time. When researching more established companies to invest in, there are important dates one should remember about the dividends – the declaration date, record date, ex-dividend date and payment date.

The information supplied in this article is not to be considered as medical advice and is for educational purposes only.