This is one of the most common instruments in the financial market. To start, you have to choose a particular corporation to invest in. Owning stocks gives you the right to receive dividends or sell your shares to another individual. While it often takes a bit of time and practice to develop a solid trading strategy, the only things you need to do to start trading are: choose a company you want to invest in, buy the number of shares you want and then wait until the shares appreciate.
- There are two main types of shares: common and preferred. Common shares usually entitle you to vote at the shareholders’ meetings – often with one vote per share – and to receive part of the company’s profits known as dividends. However, the payout of dividends depends on the capital growth of the company. Some companies choose not to pay dividends to common shareholders at all.
- Preferred shares receive a fixed dividend and in the event of bankruptcy, they are paid off before common shares.
- The prices of shares are set in an auction where buyers and sellers place their bids and offer to buy and sell.