A stock is represented by a stock certificate. This is a fancy piece of paper that is proof of your ownership. In today’s computer age, you won’t actually get to see this document because your brokerage keeps these records electronically, which is also known as holding shares “in street name”. This is done to make the shares easier to trade. In the past, when a person wanted to sell his or her shares, that person physically took the certificates down to the brokerage. Now, trading with a click of the mouse or a phone call makes life easier for everybody.
Now we are turning to the stock market.
As it was mentioned before, ordinary shares’ purchasers
typically invest their funds into the company-issuer and
become its owners. Their weight in the process of making
decisions in the company depends on the number of shares
he/she possesses. Due to the financial experience of the
company, its part in the market and future potential shares
can be divided into several groups.
1. Blue Chips
Shares of large companies with a long record of profit
growth, annual return over $4 billion, large capitalization
and constancy in paying-off dividends are referred to as
2. Growth Stocks
Shares of such company grow faster; its managers typically
pursue the policy of reinvestment of revenue into further
development and modernization of the company. These
companies rarely pay dividends and in case they do the
dividends are minimal as compared with other companies.
3. Income Stocks
Income stocks are the stocks of companies with high and
stable earnings that pay high dividends to the shareholders.
The shares of such companies usually use mutual funds in the
plans for middle-aged and elderly people.
4. Defensive Stocks
These are the stocks whose prices stay stable when the
market declines, do well during recessions and are able to
minimize risks. They perform perfect when the market turns
sour and are in requisition during economic boom.
An important but often overlooked aspect of under capitalisation is the effect it will have on your trading; if you are trading because you need the money, then you are trading scared and you’re almost certainly going to lose. You cannot distance yourself from the money-aspect of the trade if you are relying on the money.
Living expenses are only one part of the financial equation. Next you must consider how much trading capital you need. This is the money actually facilitate trading, in other words your account balance for trading margin, and the money you will be spending on data feeds, software, and internet access. You must account for this separately, you cannot start eating into your daily living expenses money just because you took a bad trade and need some more margin.