Understand Stocks and Types of Stocks

Stocks as one of the alternative media investment has the potential level of profit and loss is greater than other investment media in the long term. For that you need to learn the ins and outs of this stock investment first, so you can avoid the losses that should not happen. For that we must know the ins and outs of stocks, ranging from the understanding of stocks and stock types.

Understanding stocks

Stocks shares are securities that are a sign of ownership of a person or entity to a company. Understanding this stock means the securities issued by a company in the form of Limited Liability Company (PT) or commonly called the issuer. Shares claim that the shareholder is also the owner of part of the company. Thus if an investor buys shares, then he becomes the owner or shareholder of the company.

The realization of a stock is a piece of paper explaining that the paper owner is the owner of the company that issued the paper. So the same as saving in the bank, every time we save then we will get a slip that explains that we have deposited some money. In stock investments, what we receive is not a slip but a stock.

Types of Shares

The Company may issue 2 types of shares, common stock and preferred stock.

Common stock

Common stock is the true owner of the company. They run the risk and make a profit. When companies are bad, they do not receive dividends. And vice versa, when good company conditions, they can earn bigger dividends even bonus shares. This common shareholder has voting rights in the GMS (general meeting of shareholders) and determines the company's policy. If the company is liquidated, the common shareholder will divide the remaining assets of the company after deducting the preferred shareholder.

Common Stock Characteristics are as follows:

•      The voting rights of shareholders, may select the board of commissioners
•      Rights take precedence, when the issuing organization issues new shares
•      Limited liability, on the given amount only

 

Preferential Shares

In addition to common stock we also know of the preferred stock. As the name implies, this preferred stock gets the privilege of paying dividends over common stock.

The characteristics of Preferred Shares are as follows:

•      Has various levels, can be published with different characteristics
•      Claims on assets and income, have a higher priority than ordinary shares in the case of dividends
•      Cumulative dividends, if not paid from the previous period, may be paid in the current period and earlier from the common stock
•      Convertibility, can be exchanged into ordinary shares, when an agreement between the shareholder and the issuing organization is formed

When can investors buy shares?

An investor can buy shares in both primary and secondary markets. In the primary market, new publishers go public offering their shares to investors through underwriters and realtors.

Investors may purchase directly through the underwriters or through the selling agent. Then the shares purchased on the primary market can be traded through the secondary market or on the stock exchange through the brokerage firm.

Why buy shares?

Buying shares is another alternative in securing and simultaneously increasing the value of wealth (in this case wealth in the form of money). So secure and increase the wealth can be in various forms, for example: piggy banks, store in the bank, buy gold, buy land, buy apartments and much more.

Why choose stock for investment?

If the deposit gives a reward (interest rate), which is relatively limited, say 15% per year, of course we will be willing to buy stocks, if the stock is able to give rewards greater than 15%.

So choose an investment in stocks, because it is more profitable. Because of the excess of saving by owning a stock is its ability to provide unlimited profit. This infinite does not mean that the profits of ordinary shares investment are very large in rupiah.

However, depending on the development of the publishing company. If, the issuing company is able to generate large profits, then it is likely that its shareholders will enjoy great profits as well.

Because, with such large profits, can be expected large funds to be paid as dividends. In various types of investment instruments offered to the public. Saving money is not just bank deposits because interest rates tend to fall freely.

While saving money, how to make your money "work" for profit? We should understand the types of investment instruments. Is the transaction mechanism (purchase and sale) of an investment instrument -as common stock, preferent, bond, right issue, warrant, and mutual funds are easy or difficult to do so?