Stocks represent ownership within a company
Stocks also known as equities are financial securities representing ownership in a company or issuing body. Shares are units of stocks which entitle investors to a portion of the company’s profit and decision-making. Stocks form the basis of most investor’s portfolios and have proven to be one of the best-performing securities in the long run.
Get started trading stocks in a virtual environment before risking real cash and become an expert investor with no capital investment. Download the Trades Trek Stock-Trading Simulator today and get 500,000NGN in virtual cash to start trading on the stock market today!!! Available for download on Android and IOS.
Understanding Stocks
Companies issue stocks to raise capital for their business. And in exchange for this capital, they give out a portion of their company to those who buy shares of their stocks. These people are called shareholders.
A shareholder in a company owns a portion of that company, and this portion depends on shares owned to the number of outstanding shares. For instance, if a company has 100 shares of stock on the market and a single person owns 10 shares. It means the person owns 10% of the company and has a 10% claim to company profit and assets.
How Do Stocks Work?
Stocks are traded electronically through online broker platforms. In Nigeria, stocks are bought and sold on the Nigerian Stock Exchange (NSE). The value of stocks fluctuates based on factors such as; market conditions, business performance, and investor sentiment. Investors buy stocks because of its ability to increase in value over time. And also, to earn an income from dividend-paying stocks.
Types of Stocks on the Nigerian Stock Market.
On the Nigerian stock market, there are two main types of stocks; common and preferred stocks.
Common Stocks
Common stocks represents ownership of a company, it is the most common stock on the market. Investors in common stock are entitled to a share in the company profits and also have voting rights in the company.
Preferred Stocks
Investors in preferred stocks do not have voting rights in the company. However, they have a higher claim on company assets than investors in common stock. Such that they receive dividend payments before investors in common stock. Also, in the case of bankruptcy or liquidation, investors in preferred stocks are of more priority than investors in common stocks.
What is the difference between stocks and bonds?
Both stocks and bonds are tradable financial assets. Stocks, however, represent ownership in a company, while bonds represent debts, which are paid back with interest. Stockholders have a share in the company’s success and failures and make money through increases in stock value and dividend payments. While bondholders are creditors and receive fixed interest payments.
How can I Earn from owning stocks?
Investors earn money from stocks in two ways; capital appreciation, which is an increase in the value of stocks over time. And dividend payment which is a part of the company’s profits paid to shareholders. Investors often reinvest dividends paid by purchasing additional stocks to compound their returns and sustain profit over time.
Is it risky to own stocks?
Investing in financial securities comes with one form of risk or the other. Stocks, mutual funds, bonds, and ETFs can decline in value based on market conditions and business decisions. However, diversifying your investment portfolio can help mitigate the effect of these declines. Also, thorough market analysis before investing in a company’s stocks can help make informed financial decisions.
FREE STOCK-TRADING SIMULATOR
Get started trading in a virtual environment before risking real cash. Download the Trades Trek Stock-Trading Simulator available on Android and IOS and get 500,000NGN in virtual cash to get started today!!! Become an expert investor for free with no capital investment.
