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Stocks and Shares

Stock Market Basics, Money and FinanceA share or stock is a document issued by a company, which entitles its holder to be one of the owners of the company. A share is issued by a company or can be purchased from the stock market. In common language, the terms share is used in reference to a number of shares referred to as stock. By owning a share one can earn a portion of the dividend of the company and by selling the shares one gets capital gain. Thus the owner’s return is the dividend plus the capital gain. However, there also is the risk of making a capital loss if one sells the share at a price below the buying price.

A company's stock price reflects what investors think about the stock, not necessarily what the company is "worth of." For example, companies that are growing quickly often trade at a higher price than the company might currently be "worth of." Stock prices are also affected by all forms of company and market news. Publicly traded companies are required to report quarterly on their financial status and earnings. These financials of the company affect the performance of the share in the stock market. Companies with better financial earnings are traded at higher price in the market. Market forces and general investor opinions can also affect share price.

Facts on Stocks and Shares

Owning a stock or a share means that the owner becomes a partial owner of the company, and automatically gets voting rights in certain company issues .On the long run, stocks have historically averaged about 10% annual returns However, stocks offer no guarantee of any returns and can lose value, even in the long run.

How does one trade in shares ?

Every transaction in the stock exchange is carried out through licensed members called brokers.To trade in shares, one needs to approach a broker However, since most stock exchange brokers deal in very high volumes, they generally do not entertain small investors. These brokers have a network of sub-brokers who provide them with orders. General investors should identify a sub-broker for regular trading in shares and place his order for purchase and sale through the sub-broker. The sub/broker will transmit the order to his broker who will then execute it .

Active Shares

Shares of a few leading companies are traded with a higher frequency ( their shares are in demand and change hands frequently during the trading session) than other companies. These are called the active shares in the stock markets. Some market analysts would define active shares as those which are bought and sold at least three times a week. Easy to buy or sell. Generally these stocks reflect the true value of the company and are based on strong fundamentals.

 

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