How to Invest in Stock
Stock is the shares in which ownership of a company is divided. In American English, the stocks are collectively referred to as ‘stock’. Each share of stock represents one fractional ownership of the company in percentage to the outstanding shares of stock issued. There are two types of stock: common stock and preferred stock. Among the two, common stock is the most common.
A corporation issues new shares from the ‘new stock’ or ‘new stock purchase’ and receives payment for them from the shareholder. The shareholder then sells his/her shares at a price higher than the outstanding stock. The purchaser receives a dividend, which is usually given in cash but also in kind. The dividends are given on most companies’ stocks monthly. In the United States, most of these companies have special boards, composed of an executive and a board of directors, which meet regularly.
A corporation may issue shares to holders of which have paid or unpaid dividends. The dividends are considered income for the shareholders and are added to the corporation’s assets, making the shareholders owners of those assets. The assets, in turn, become the property of the corporation and can be used to invest in business ventures or to make dividends.
One of the popular ways of investing in stock is through dividend reinvestment. This is also known by the name ‘reverse stock market’. The idea behind this method is that a shareholder can buy back shares of stock from the corporation at a higher price that is higher than what he had originally paid for them. He does this through a brokerage firm or bank.
Another way of investing in the stock is through ‘preferred stocks’. The shares of these are always lower than other types of stocks. This happens because they are less likely to be traded and are always owned by the company directly. The company does not have to issue more Preferred Stocks if it has enough funds from its own profits to do so.
In order to make money off of Preferred Stocks, a person needs to buy at a lower price than his original purchase, with the intention of selling it again later on for a higher price. If the owner wants to sell his Preferred Stock, he does this by creating a new company, called a Reverse Stock, and then going back to the broker who sold him his Preferred Stock. The broker will then transfer the ownership from the Reverse Stock to the new owner. This is the process on how a company makes money by Preferred Stock ownership. There are basically two main ways to make money off of Preferred Stocks: by gaining ownership and by selling them later on.
