The Basics of Stocks Investing

Stocks are all the stocks in which ownership of an organization is divided ownership. In American English, all the stocks are collectively referred to as “stock.” A single share of any stock represents a fractional ownership of that corporation in percentage to the total number of outstanding shares. Stocks are divided in to several classes: common stock, preferred stock, original issue stock, warrants, and stocks in multiple businesses.


There are two primary advantages of stocks. The first advantage of stocks is that they allow the holder to be involved in the management and the profits of the business. These stocks are also called the equity. Secondly, the profit made out of stock investing is tax-free. Most dividends received are tax exempt. Dividends are paid on stocks on which the company has not yet paid the Federal tax.

A company that possesses a large amount of dividends is called a dividend paying company. In America, many big dividends are paid by the companies yearly. One of them is the dividend per share paid by the New York Stock Exchange to its shareholders every year. The second advantage of stocks is that the rate of profits and capital gains are stable. This means that the profit will remain the same each year.

Stocks can also be used to raise capital. By selling stocks, you can raise capital for the growth or expansion of your business. You can also use stocks to finance specific projects that you have. The capital thus raised can be used either for expansion, purchase of raw materials, and plant and equipment expansion, or for paying debts and general expenses.

A typical business usually has two kinds of ownership: common ownership and limited liability. Common ownership is when most of the shareholders or the ownership is held by the same person. Limited liability, on the other hand, is when a particular person holds a particular share and does not actually own any shares in the business. He can, however, be held liable for the debts of his corporation. Some types of stocks are fully taxable, such as dividends received from stock investments; in other stocks, such as penny stocks, they may be taxable depending on the activity of the company and the owner’s intent.

To avoid the risks involved with stock market investing, it is advisable to study the basics first before making the investment. An internet connection is generally needed for stock market investing. It is typically the best way to research and evaluate stocks. Websites offer tutorials for investors. It is also wise to subscribe to financial newsletters provided by experts in order to keep abreast of market developments.

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