A stock is simply an investment. When you buy a company’s stock, you are buying a tiny piece of that corporation, known as a stock. Investors usually buy shares in businesses they feel will grow in value over time. If you have stock in a business, you may also be known as a shareholder since you actually participate in the profits of the business.
Many people are curious about how they can buy shares in a business through an Initial Public Offerings (IPO). Investing in a business through an IPO is pretty straight forward. There are investors who buy shares at the price of zero and then hope that the company turns a profit. Other investors trade shares in hopes of seeing a rise in their investments. Either way, there are a few things you should know before you get started.
First, some investors are familiar with the New York Stock Exchange (NYSE) and a few private exchanges around the country. Others don’t. The New York Stock Exchange offers trading rooms for trading penny stocks, common stock shares and derivatives like options, futures and warrants. The SEC has information about private stock exchanges, such as OverTheCounter Marketplaces where individuals and institutional traders can trade shares and stocks without having to have an account with the Exchange.
To buy shares in a business, you must own a certain percentage of the total shares in the corporation. Usually this is referred to as ownership, or equity. If you have 100% ownership of a corporation, then you hold 100% of its stock. The more shares you have, the higher the chances are that your corporation will be successful and be able to maintain its current value.
There are also several types of mutual funds. Some are known as blue chip stocks, because they are usually well established and traded on major exchanges. These include the FTSE100, the Dow Jones Industrial Average and the NASDAQ Composite. Blue chip stocks are often among the safest investments that investors can make because of their reliability and the fact that most of them are traded on major exchanges.
However, as an investor, it is important to know that buying stock through an IPO is not always a good idea. An IPO is usually a private offering by a company to raise additional capital. This means that the price of the stock will not be set by a regulated exchange. As a result, the value of a particular stock may be driven up or down based on expectations of an IPO for the company.