Stocks

What is stock?

A stock is a general term used to describe the ownership certificates of any company.

What is Share?

          A share, on the other hand, refers to the stock certificate of a particular company. Holding a particular company's share makes you a shareholder.

Types:

1.       Common shares

2.       preferred shares

What is common stock?

Common stock is what most people think of when they think "stock." Common stock allows its holders to make a profit through rising share prices and dividend payments. Holders of common stock also get to vote on corporate issues, such as electing new directors to the corporation's board. However, should the company end up in bankruptcy, holders of common stock are last on the list to get their money back -- after regular creditors, bondholders, and holders of preferred stock. If you hold common stock and the company goes bust, you are unlikely to get any of your capital back.

What is preferred stock?

Preferred stock also represents owning a share of the company, but it works a bit differently than common stock. Preferred stock pays a predetermined dividend, whereas the dividends paid to common shareholders tend to vary according to the company's fortunes. Dividends on preferred stock are often larger than those on either common stock or the company's bonds. Holders of preferred stock do not get a vote on company matters. And if a company's assets are liquidated, the preferred stockholders get to redeem their shares before common stockholders do, giving them a better chance of getting at least some of their money back. 

Which is better?

For most investors, common stock is a better deal. It's slightly riskier than preferred stock, but will usually show a slightly higher return as well. If you want to enjoy the potentially high returns of a stock investment but want to minimize your investment's volatility or your exposure to company-specific risk, preferred stock might be a better choice. Preferred stock may also be better if you're looking for a source of income you can depend on, as the dividends paid on such stock are fixed. But whichever class of stock you choose, be sure that it's an investment you'll feel comfortable holding over the long haul.

Investor Vs Trader

When it comes to wealth creation in share market, investing and trading are the two types. However, investing and trading are different approaches of wealth creation or generating profits in the financial market. 

Investor

        An investor is person who commits with his capital with expectation of future returns.

Investors uses various investment channels to grow their money to get benefits during the retirement.

A wide variety of investment vehicles,

1.   Stocks

2.   Bonds

3.   Commodities

4.   Mutual funds

5.   Exchange-traded funds (ETFs)

6.   Options

7.   Futures

8.   Foreign exchange

9.   Gold, Silver

Trader

A trader seeks to generate short-term profits by buying and selling securities over and over again.


Differences between Investors and Traders 

Investor	Trader
Long-term investment horizon	Short-term investment horizon
Buy and sell rarely	Buy and sell frequently
Time poor	Time to actively manage portfolio
Risk averse	Comfortable with risk

Investment

In general, investment is to distribute money in the expectation of some benefit in the future,

What are the different types of investments?

1.         Shares

2.         Property

3.         Fixed Interest

1. Shares

Shares are considered a growth investment as they can help grow the value of your original investment over the medium to long-term.

If you own shares, you may also receive income from dividends, which are effectively a portion of a company’s profit paid out to its shareholders.

Of course, the value of shares may also fall below the price you pay for them. Prices can be volatile from day to day and shares are generally best suited to long-term investors, who are comfortably withstanding these ups and downs.

Also known as equities, shares have historically delivered higher returns than other assets, shares are considered one of the riskiest types of investment.

2. Property

Property is also considered as a growth investment because the price of houses and other properties can rise substantially over a medium to long-term period.

However, just like shares, the property can also fall in value and carries the risk of losses.

It is possible to invest directly by buying a property but also indirectly, through a property investment fund.

3.Fixed interest

The best-known type of fixed interest investments are bonds, which are essential when governments or companies borrow money from investors and pay them a rate of interest in return.

Bonds are also considered as a defensive investment because they generally offer lower potential returns and lower levels of risk than shares or property.

They can also be sold relatively quickly, like cash, although it’s important to note that they are not without the risk of capital losses.

 In finance, the benefit from the investment is called a return. The return may consist of a profit from the sale of property or an investment, or investment income including dividends, interests, rental income etc., or a combination of the two. The projected economic return is the appropriately discounted value of the future returns.

Investors generally expect higher returns from riskier investments. When we make a low-risk investment, the return is also generally low.

Investors, particularly novices, are often advised to adopt a particular investment strategy and diversify their portfolio. Diversification has the statistical effect of reducing overall risk.