What to know before investing in stocks?

The price of shares on the stock exchange is formed according to supply and demand, that is, according to purchases and sales: If the purchases of a security exceed the sales, the price of the security goes up. If the sales exceed the purchases, the stock price falls.

A share, in economics and above all in the stock market, is a type of financial asset that represents one of the parts into which the share capital of a company is divided. In other words, the stock is the best known type of financial asset in the world. Before starting to invest it is necessary to clarify what they are, what determines the value of a share and how to analyze them to decide whether or not to buy shares of a particular company.

What are shares and how do they work?

What are stocks?  A share or stock represents a portion of the share capital of a company, meaning by share capital the value of the contributions of the shareholders. In other words, shares give their holder the status of owner and, as such, a shareholder has certain rights, such as the right to vote at general meetings or the right to participate in profits.

Publicly traded companies usually have their share capital divided into a large number of shares, so that anyone can buy a certain number of shares on the stock exchange of the country where it is listed. In this way, the person in question becomes the owner of a part (share) of the company. However, his percentage stake in the company will likely be very low and he will not have enough power to impose his will on the management of the company.

You must treat your stock investment like any other business. If you trust a company that works and even grows, why not own it? On the other hand, if you have a business for which you don’t have good prospects for the future, the most logical thing to do would be to sell it, even if it means losing money, since you could lose more if you stayed.

What types of shares are there?

Now that we have seen what stocks are, let’s see the type of stocks that exist. They are classified in different ways and according to their “function”. For example, there are the following types of actions:

Ordinary shares: This type of share entitles you to participate in the company’s profits (i.e. to collect dividends) and to vote in the company’s general meetings on various issues.

Preferred Stock: Equivalent to one stock value with priority over common stock in dividend payments. The dividend rate of these shares can be fixed or variable and is established at the time of issue.

Limited Voting Securities: Type of shares that carry voting rights over certain aspects of the company contained in the share subscription agreement. In addition, these shares are preferred or generally give the right to receive a higher dividend than ordinary shares.

Convertible Stocks: A type of stock that can be converted into securities and vice versa, although securities are often converted into shares.

Industrial Securities: In this case, the shareholder contribution is given by the performance of some service or work.

Paid Shares: These shares are issued without the shareholder having to pay for them, as they have been paid for with the profits or earnings the shareholder is expected to receive. Proprietary share: it is the share that belongs to the same company that issued it.

Securities with nominal value: they are a type of share in which the value of the contribution appears numerically. Shares without par value: as the name implies, these are shares in which the value of the contribution does not appear, the proportional part that they represent in the issuing company’s share capital being established.

What rights do shares confer?

By purchasing the shares and becoming a shareholder at the same time, you gain access to a number of rights, including the following:

Right to obtain a share in the profits or benefits of the company, which gives the right to collect dividends distributed by the company issuing the shares in the year established by the calendar. They have the right to be informed about the current state of the company.

They have the right to speak and vote at the General Meeting of Shareholders to vote on certain measures.

They can decide to transfer their shares. Preferential option right to subscribe for new series of shares or right to receive paid-up shares. Why are companies and stocks listed on the stock exchange?

Companies, faced with the need for finance to make investments or the need for capital to repay debts, can resort to an exit on the stock market. To this end, the new shares are issued and listed on a regulated market. This forces companies to make their accounts public, so that every potential shareholder has all the information they need to value the company.

For a company, being listed on the stock exchange allows it to be more visible to its potential customers, to obtain better financing conditions and a certain prestige. For a company’s customers, suppliers and investors, being listed on the stock exchange is a guarantee of transparency and solvency.

Do you want to know which are the best multinationals listed on the Stock Exchange?

Number of shares in a company: How many shares is a company divided into?

The number of shares into which the capital of a company is divided is determined when the company is set up, taking into account the contributions made by the founding shareholders of the company, as well as the indications provided regarding the methods for dividing the capital.

However, it should be noted that the number of shares can be increased or decreased, depending on the actions taken by management. In this sense, the company can increase or decrease the share capital, by increasing or decreasing the number of shares into which the company is divided. Read: Differences between authorized shares and outstanding shares.

What to know before investing in stocks?

Swing trading is a type of stock market trading where a trader tries to profit from “swings” in the price of a stock. Between day trading and long-term investing, it is in the middle. The normal trading period for swing traders is a few days, or at most a few weeks. Check here the tips for beginner swing trading strategies. You may also visit Vector Vest to know more about this topic.

Now that you understand what stocks are, let’s see how to invest in them. There is a lot of information circulating on the Internet. In this article we want to make a summary that is simple and quick to read so that you can take advantage of the maxim: time is money

Investing in stocks is one of many options for investing your money. Stocks are a very popular form of investment, but they aren’t the only option. Depending on your needs, your income and when you need access to money, you can take advantage of a number of different investment strategies. These include putting money into a savings account, buying real estate or investing in bonds, precious metals and foreign currencies. All of these investment strategies involve different levels of risk and return.