A company’s stock refers to the capital originally invested. This is divided into shares, which must be declared from the time of the company’s foundation. Shares are representations of percentage of ownership an entity has of a corporation. The term “stocks” is also commonly used interchangeably with shares.
Stocks are documented by way of stock certificates. These are documents which serve as proofs of ownership. However, it is also quite common to store this electronically. This facilitates easier trade, especially in the current age of digital information.
Shareholders are part owners of the company. However, they do not usually make decisions and rarely have the power to dictate what direction it will take.
The company’s Board of Directors usually controls decision-making. It is their responsibility to keep shares valuable and in effect, make investing in the company attractive.
Individual investors usually do not have any say in how the company is run. On the other hand, institutional investors are able to influence the company’s Board by virtue of their ownership of a substantial percentage of the corporation’s shares.
Investing in stocks has its share of risks. However, there is a cap on this, because an investor can only lose as much as he invested.
The most important step is to first do some research on the company’s financial condition. Aside from going over the company’s financial reports, it is also wise to take a look into the company’s investment goals and overall performance since it was founded.
The stock market is a reliable source of information on the company’s value, which includes data on sales, total assets, and growth rate. One of the most important elements to consider when investigating on these figures is, of course, the company’s consistency.
