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
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.