Monday, 12 August 2013

Stock Market Basics Information

There is not much difference to point out between gambling and the functioning of the stock market. The investors put in money in the stocks and just leave it on fate for the company to do well so that the investors gets back profits generated by the company as per the share that they have bought. Although much of analysis is done to predict the future performance of a share, it depends greatly on fate and nothing can be said for sure whether a company will do better or fall down in its business. This makes it similar to gambling.
New investors think stock market nothing more than a gambling place where their investment would either bring huge profit that will make their life or will bring devastating losses. This makes no big difference between a game of roulette and stock market investment. However, this is just a view through the eyes of a newbie in this field and as you get deeper into stock business, you get more experience and understand the nature of market well. Experience helps you manage your money in a better way and possibly, it keeps your hard-earned cash safe as well as helps you obtain enough profit from your investment.
The unexpected and unpredictable behavior of the stock market might threaten a lot many investors from putting in their money in shares. However, understanding the in depth facts regarding it might help you get relieved from the stress and fear that you have regarding stock market investment. Here is some basic information about stock market. A share that an investor buys is actually a share of ownership in the company. When an investor buys a share, he is entitled to a small fraction of the assets of the company and the same fraction of the profits of the company.
Once you buy a share, you possess ownership to a part of every asset that a company possesses including building, trademark and equipment. They also have share in all the profit that the company generates by selling its products but they also have to suffer the losses if the company suffers from loss.  There are two types of shares – preference share and equity share holders. The preference shareholders are paid the dividend before paying to any equity shareholder. They receive dividend at a fixed rate irrespective of what profit the company is generating and even if the company is in loss. However, the equity shareholders receive huge dividend as per company profits but they may need to suffer from losses if case company suffers the same.
One question might arise in your mind that why would a company allow shareholders to buy shares. The reason for this is that the company needs money to cover the startup investment or to expand itself and so it accepts money from people all around the world. They accept shares with a specific face value, which is a price of one share of the company. That is the minimum amount of investment that a person can make in the company. The face values for different companies are different and may vary as per market conditions and their needs.