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What are Stocks? Facts about Investing in Stocks.

Updated on October 31, 2011


Stocks are a great way to invest your money. When you buy stock, you are able to do so because companies have issued stock to the public to generate funds for a number of possible activities. You are getting a "slice" of company ownership when you buy stocks.

People buy stocks for many reasons, but the bottom line is the hope to make money on the investment. People invest in companies they believe in, and trust that company is going to do well in the future. If the company does well, then it prospers and so do all the stockholders. So the idea is simple and it works.

Common Stock

You will find that stocks that come in the form of common stock, and preferred stock. The most common kind of stock is just that, common stock The public buys these kinds of stocks. Common stock represents a portion of ownership in the company. This makes that person with the ownership eligible for any dividends that company generates.

If a company should have problems financially and ultimately fail, then common stocks allow for some kind of payback. Often it is small, but that is still better than nothing. The reason it is small, is that the company has had to pay back any money it owes and pay the creditors.

Wall Street - A lot of people gathered once on Armistice Day
Wall Street - A lot of people gathered once on Armistice Day

Preferred Stock and other types of Stock

Some people really prefer the preferred stock options. You will find that preferred stock has a bit more "muscle", over common stock. For instance, the dividends with preferred stock are guaranteed. That is great in itself, but the dividends are also larger than common stock dividends.

With preferred stock, if the company fails then the stock holders get a bit more than they would if they were investing in common stock. They get a bit more of whatever is left. You can see why this is obviously more appealing.

There are a few different types of stocks. The main ones you will find are international stocks, growth stocks, blue chip stocks, income stocks, and value stocks. A couple that I would not be as attracted to would be initial public offering stock, or IPO, and penny stocks. Those are pretty risky, but then you have some risk takers out there, so that may appeal to those people.


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    • oceansnsunsets profile image

      Paula 6 years ago from The Midwest, USA

      Thank you very much!

    • AllSuretyBonds profile image

      AllSuretyBonds 6 years ago

      Great Hub. Perfect article for people who are looking to learn more about what stocks are and what the stock basics include. Voting you up!