How to Raise Money Through Stocks
In the world of finance, stocks comprises all the shares in which ownership of a business or an organization is divided into several stocks. Each share of this stock is entitled in certain percentages to the dividends. In simple words, every share on this stock is an investment.
As on date, stocks are the most common stock in the market. All the big companies and organizations like industries, organizations, banks, financial institutions, etc. issue common stocks for public sale. Common stocks are issued in several types like preferred stocks, common stocks, dematerialized stocks, etc. In addition, there are several other stocks like mutual funds, limited partnership stocks, nominee stocks and treasury stocks that are not publicly traded in the market.
Most of the investor prefer shares that are listed in the stock market because they offer better return on investment and a relatively better risk tolerance. However, there are some characteristics that a share must have to be eligible for inclusion in any of these markets. Most of them have limited liability and are usually preferred over the stocks listed in the Big Banks. They are available at lower rate of commission and have a long-term maturity. However, for short-term investors, preferred stocks and common stocks are preferred over the treasury shares and mutual funds.
Long-term investors or the institutional traders prefer to buy shares through registered brokers or agents who can give them access to numerous shares from a wide range of companies at a time. But this method has its own set of disadvantages. Brokers usually charge higher amount of commission for selling the stocks to the institutional traders. They also do not guarantee regular flow of income to the long-term investors. Therefore, it is necessary that the investors have their own money to invest in the stock market.
After determining the stock market capitalization or the market value of the outstanding shares, it is necessary to find out the price per share (PPS) of that particular company. To do so, divide the market value of each share by the number of outstanding shares. Then find out the market capitalization or price per share ratio. This ratio indicates the profitability of any company. A company with a market capitalization equal to more than ten times the PPS of other companies will be a high-risk in terms of investment.
If you are looking for ways to raise money for your business, one of the best options is to opt for a company’s ownership share. When these stocks are bought in large amounts, it will not be easy for you to sell it back to investors later at a profit. However, if you have your own money to buy stocks, then you can easily sell it back to investors when the company becomes established. By doing this you can make money by investing in the stock market and can also buy shares of a new start-up company at its proper valuation.