What have shares and stocks been? If you would like shares and stocks explained easily in plain English then read on!
Initially, stock and shares are different words, but in the world of the stock market, they are representing the same thing. For example, you could say “I have stock in Microsoft” or “I have shares in Google”. Hence, if you must see sharing and stock used, it is essential not to get confused as they both are the same things.
Here are clearly defining both of us:
- Shares are a single unit of stock.
- The capital raised in stock by a company through the issue of shares.
Why have shares been present?
Shares are issued by a company to move up the money (capital) to help make a plan for future projects or because the company owners want a huge amount of money for themselves as a prize for the solid work they have put into rise up the company!
Joe Boggs owns 100 per cent of Company A (for arguments sake we will say he owns every one 100/100 shares of company A).
The owner of Company issues shares of his company and decides to sell 40 per cent of the company shares (40 shares).
Why must the public purchase shares offered by company A?
The stock market trader would purchase the shares in order to cut a few of the future profits made by the company. They would get these profits in the form of dividends.
But that is not the only reason!
The stock market trader could also make money by a go up in the price of each share. This is called a capital gain on their stock.
John carry purchase 20 shares of company A at $10 each, that’s a total of $200 spent
The company continues to expand and so do its profits. Therefore insist (demand) for shares in Company A have risen. This means people are now willing to pay $18 per share in Company A
John carry sells her 20 shares for $18 each. That’s means she collects $360. As a result making her a tidy profit of $160 or 80 per cent!
Types of shares
There are 2 types of shares, preferred shares and ordinary shares (also known as “common stock”).
Preferred shares have fixed dividends, which must be paid previous to any dividends are paid to ordinary shareholders. However chosen shares carry out but no voting privileges.
Most Of trader used Ordinary shares that are the most common type of shares and carry flexible dividends (dividends that are adjusted in according to a company’s profit), these shares also occupied voting privileges.
It is essential to note that when dealing with shares in the stock market as we know it, you will almost always be dealing with ordinary shares (common stock) and it’s not a problem you should worry about!