What are Stocks? Stock includes what types? - Insurance Finances

What are Stocks? Stock is best known as a stock. This is a widely used concept in the financial market today.

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Stock has many different meanings. Depending on the field, it will have different meanings. Stock is used in graphics, in sales.

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However, when it comes to what a stock is, most people will immediately think of its stock function. In this article, we will also look at Stock in the sense of a stock, thereby seeing the current characteristics and classification of stocks.

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What are Stocks?

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Stock is the English name for stock. This is a form of confirming the capital contribution of shareholders to a certain business or corporation.

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For companies, issuing shares is a way to raise money for growth and investment in their business. For investors, stocks are a way to grow their money and weather inflation over time.

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When you own stock in a company, you are called a shareholder because you share in the profits of the company.

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Stock prices fluctuate during the day, but investors who own stocks hope that over time, the stock will increase in value. However, not every company or stock does the same: Companies can depreciate or cease operations altogether.

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When that happens, equity investors may lose all or part of their investment. That is why it is important for investors to spread their money, buying shares of many different companies instead of focusing on just one company.

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“Stocks are securities that represent partial ownership in a company. For companies, issuing shares is a way to raise money for business growth and investment.”

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What are the characteristics of stocks?

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A stock has many distinctive characteristics:

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Valuable

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The first thing that can be noticed in a stock is its value. Stock is a representation of value, of a real asset. Stock holders own real assets and can convert shares into cash if desired.

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Depending on the value of shares of each company, shares will have different value norms. Usually, the larger the business, the more valuable the stock is.

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Profitable

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As we know in the section what is a stock, a stock is profitable because it represents the assets of the company. That asset will increase over time, proportional to the growth of the business. This also means that it is also risky.

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In case the business performance of the business is not high, the stock price will decrease. As such, stocks are an asset class with a variable nature, not a fixed one.

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In addition, shares are also transferable. Therefore, at present, there are many activities of buying, selling and investing in stocks. This shareholder can transfer his shares to another shareholder in part or in whole.

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Stock classification

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Classification according to the interests of shareholders

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Not all stocks are the same. Corresponding to each different shareholder, the stock will also have differences:

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Common shares: Common shares will be owned by common shareholders. Shareholders are the group of people who are the owners of the company. Through the company's performance, shareholders will be divided profits or reduced profits depending on the number of shares owned.

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These are also the people who receive a portion of the company's assets if in the event the company is liquidated. However, the portion received will be calculated after deducting all debts that the business is carrying.

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Preference shares: Preference shares have both the characteristics of common shares and the characteristics of debt securities. For shareholders who own preferred shares, they will be given priority to receive dividends first.

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However, this share does not have the right to vote or participate in the general meeting of shareholders. They will receive dividends through a certain standard of capital contribution, not according to business results like common shareholders.

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Classified by status of issue of shares

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Classification according to this form will have 2 basic types of stocks:

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Issued shares: This type of stock has been paid out in full by investors. The information about the owner has been correctly and fully recorded in the register of shareholders of the enterprise.

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Outstanding shares: These are shares that are being held by shareholders.

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Treasury shares: These are shares that are being issued by joint stock companies. The same company can then buy back those shares.

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Issued shares: This is the number of shares that are about to be issued by the business, for the purpose of raising more capital for the company. These shares are eligible for issuance, having received the approval of the shareholders' meeting.

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Sort by profitability

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Stocks are profitable. However, the level of profitability of each type of stock is not the same. Classified according to this form will have the following types of stocks:

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Premium stocks: These are stocks of large companies with good records, stable business operations and guaranteed profit growth. Almost any investor wants to buy shares of these companies.

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Growth stocks: These stocks are owned by companies with strong sales growth that are above the industry average.

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Hedge stocks: These are stocks that can withstand the economic downturn, inflation.

Income Stocks: These stocks will have higher interest payments than the general average. This is also one of the very sought after stocks.

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Cyclic Stocks: This is a pretty interesting stock. These stocks will be owned by companies whose earnings tend to fluctuate with the seasons. If you trade these stocks and understand their return cycle, investors will also achieve impressive profit levels.

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Investing in stocks in the era of market economy

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With all of the above, we can clearly understand what a stock is. In today's modern and globalized economic context, investing in stocks is one of the investment channels that bring the best economic efficiency. Many investors have chosen stocks and have the financial freedom that many people desire.

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However, stock is not a playground for everyone. To get the highest security in investment, you need to choose stocks of reputable companies. However, reputable companies have very high stock prices. Therefore, choosing businesses with good and stable growth momentum is also a smart choice.

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Here are the basics of What is stock?. Stock - stocks are becoming the trend of businesses in the 4.0 era. It is also one of the most interested financial investment channels today. Hopefully with the above information, you will gain basic knowledge about stocks, and start your investment journey smoothly.

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