Stock is simply all of the outstanding shares in a company that is legally divided up among its stockholders. In simple English, the stocks are collectively referred to as’stock’. Each stockholder has his/her own right to have a vote with regard to issues regarding the company, with the company having the right to approve or disapprove the stockholder’s proposal at any time during the shareholders’ voting session. However, a single share of stock represents only fractional ownership of this company in whole percentage, indicating how many shares a person is entitled to. Thus, a stockholder will only have a right to one vote, with that single vote consisting of one percent of the total stock.
There are three main stock exchanges where most stocks are listed: the New York Stock Exchange (NYSE), the NASDAQ, and the Toronto Stock Exchange (TSX). Most people think of these three stock exchanges when they hear the term’stock market’. The New York Stock Exchange is the US’s largest stock exchange by volume, although it trades a smaller number of shares than the other two. The Toronto Stock Exchange trades about five billion shares of stock each day.
The way in which the New York Stock Exchange trades company shares is quite different from the Toronto Stock Exchange. Here, there is a list of stock listed on the exchange whose prices are not dependent on the general value of a given share, but on the opening and closing prices of the company itself. As such, profits and losses on New York Stock Exchange trades are not based on the value of stock that has been purchased (since the prices there are regulated), but are more closely tied to the performance of that company and the value of its equity.
One of the advantages of owning shares of stock is that your profits can be distributed according to your dividends. Dividends are money that a shareholder receives from the profits of a company that is registered under the US laws as an investment. They are paid in terms of regular payments either quarterly or annually. The dividends are, however, only available if you have an ownership interest in the company.
On the other hand, dividends pay dividends that accrue at a rate. As such, some investors prefer stocks that have low rates of dividends pay dividends in comparison to other stocks. Usually, the better performing stocks that pay high dividends are preferred by investors since they are able to realize profits faster. They are also able to realize higher returns on their investments because of their expertise in determining the optimal time to purchase and sell stocks.
However, stock ownership has its drawbacks. First of all, stock ownership is open to fraud and manipulation by companies that wish to manipulate the price of stocks. Another disadvantage is that most investors do not see these disadvantages coming; this makes them vulnerable to companies that engage in unethical practices.