Investing Basics – What You Need to Know About Investing in Canadian Stock Market
In the field of finance, stock refers to all the stocks in which ownership of a firm or corporation is divided. A single share of stock signifies fractional ownership in accordance to the number of outstanding shares. The ownership is based on the right to purchase or sell a particular stock at a fixed day and at an stated price. The stock certificates issued during a period are also called as securities. The term “stock” in this context does not refer to any particular kind of commodity or metal but it denotes the ownership of shares in a company. There are different kinds of stocks like common stock, preferred stock, dematerialized stock, debentures and securities exchange traded stock.
The common stock is the most popularly used in most businesses throughout the world. It represents a percentage of total assets held by a corporation. Common stocks are usually listed on the Stock Exchange of India. In the United States, the major exchanges are the New York Stock Exchange and the NASDAQ.
The dividends are paid on common stocks according to their value as determined by the board of directors. After the dividend is given, these stocks are then purchased by investors on the stock exchange. The value of a share varies with changes in the market prices.
On the other hand, voting rights dividends allow the common stockholders to decide how the earnings will be distributed among them. These stocks are generally traded on the stock exchange either under penny stocks or the pink sheets. Penny stocks are offered to investors by companies that are newly started or are about to launch. Penny stocks are known for their limited financial resources, thus they offer very low risks but also offer high rewards. Investors in these stocks have a high chance of acquiring a high profit within a short period of time. However, in order to acquire such stocks, investors need to be ready to face the risks associated with them.
Preferred stock is issued by public companies to their common stockholders. Preferred stock has voting rights which allow investors to choose dividends as well as the distribution of cash flow. When a dividend is declared, the shareholders must obtain the written consent of the Board of Directors. Common shareholders are not allowed to participate in the dividend distribution. Preferred stock is usually issued during times of expansion of a company or when it is needed in order to raise funds.
Dividends paid on stocks are different from those paid on fractional shares because they are given on a regular basis, semi-annually or yearly. Most dividend paying stocks have been regulated by the Income Tax Act of Canada. The rates differ according to the financial strength of the company. Generally speaking, the most preferred dividend paying stocks are those paid on a semi-annual basis which are considered to be an attractive option for long term investments.