TRADING STOCKS
Stock trading has become one of the most popular and efficient ways to make money since it is easy to access and it could bring a lot of money back to investors. With some extra money, anyone can purchase stocks from a company or corporation and make profit.
A stock is basically a type of security that signifies ownership in a corporation and represents a claim on part of the corporation’s assets and earnings. There are two main types of stock: common and preferred. Common stock usually entitles the owner to vote at shareholders' meetings and to receive dividends. Preferred stock generally does not have voting rights, but has a higher claim on assets and earnings than the common shares. Owning a stock means that a stockholder (person that owns the stock) has a claim to a part of the corporation’s assets and earnings. We could say that shareholders are owners of a corporation. Ownership is determined by the number of shares a person owns relative to the number of outstanding shares. The higher number of stocks a person owns, the more benefit he/she will get. People that purchase stocks would have the following advantages and disadvantages:
Advantages:
-They would be able to gain a large amount of money
-The potential loss from stock purchases with cash is limited to the amount of the initial investment.
-Stocks offer limited legal liability
-Most stocks are very liquid (they can be bought and sold quickly at a fair price)
-Investment diversification (purchasing stocks from more than one company could reduce the risk of losing money)
Disadvantages:
-Since common stock represents ownership of a business, stockholders are the last to get paid, like all other owners. A company must pay its employees, suppliers, creditors, maintain its facilities and pay its taxes. Any money left can then be distributed among its owners.
-While shareholders are