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A Beginner's Guide to Stocks and Shares in 2017

Stocks and Share. News reports were a wash with tales of investors who had incurred huge losses on their investments. Simply put, major stock markets crashed. Knowing nothing about how the system worked, I felt these investors could sue for their initial investments so everyone would be happy. Hey, don't blame me! Every pro was once an amateur. If you jump on the market at the amateur stage, your emotions would guide most of your decisions. You need to study the system. Thats why I made this website.

Before you get on those deals, you should know what the basics are. So, what's stocks? What's shares?

A share, sometimes called a share of stock, is an instrument that shows ownership of a part of a particular company.

A stock, to a company, is the capital raised by the company through the issue of shares.

To an investor, stock refers to the total shares held by an individual shareholder.

Still don't understand? A company on the stock market is usually divided into pieces called shares of stock, each piece having a price.

If someone says, I just got shares on my friend's company, it means he got a piece or two pieces or more depending on the amount paid. So you buy shares in company A, and all your shares in companies A, B and C can be collectively called stock.

They're more terms you would be coming across as an investor.

Common Stock Market Terms You Should Know
1. Blue Chip Stocks - Here, you're looking at the stock of a large company that has shown financial strength, I mean one with little or no debt and increasing dividend.

2. Broker- Called a stock broker in this world, they buy and sell orders for stock on a stock market on your behalf.

3. Dividend- Your cash out. It's a part of a company's earnings paid to shareholders periodically i.e. quarterly or annually

4. Exchange- Short for stock exchange, it's a platform, like a market for buying and selling stock.

5. IPO- This stands for Initial Public Offering. It's the first time a company offers its stock to the public. The company does this by listing on the exchange.

6. Rally- It's a rapid increase in stock prices.

So, how do you get this started?

How to Buy Stocks
You can either buy stocks directly or indirectly.

Directly- There are more risks involved investing directly and most companies don't allow this. Companies that do so however, have what's called a DSPP. Yeah, a Direct Stock Purchase Plan. It allows you to buy stock without a broker.

Indirectly- This is the common way of investing. You'd need to go through third party agents called brokers. You may also encounter what's called a brokerage. This is a firm that acts as your broker.

Brokers are of two types, the advisory broker and the discount broker.

The advisory broker buys and sells stock on your behalf and also offers advice and recommendations. That's why they're called advisory anyway.

The discount broker on the other hand, doesn't give advice or recommendations and is your man if you feel you're experienced enough to make investment decisions on your own.

If the brokers buy and sell stock, does it mean you should buy all kinds of stock?

The Different Types of Stock Offered
There are usually of two types, common stock and preferred stock. Take a look at each.

Common Stock
A lot of the stock you would see trading at the exchange are common stocks. It comes with more risks than the preferred stock.

It gives you periodical dividends (though not guaranteed) and voting rights, mostly one vote per share to elect board members that set up the management.

And yes, your pay out over time is greater with common stock but this comes with a drawback. The preferred stock shareholders get paid before you if the company goes bankrupt.

Preferred Stock
Maybe you may "prefer" this but preferred stock doesn't come with voting rights. It's still quite attractive though as you're assured fixed dividends and would be paid before the common stock shareholder if the company goes bankrupt.

If you think this is all safe, know that the company can repurchase the shares from you at any time though with compensation.

The stock market is a planet of its own. This is just a beginner's guide. You need to stay updated on the current market trends and techniques to make it here.

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