Share Market

Posted by Finance Professional on May 9, 2011 under Stock Market News | Be the First to Comment

The first step for you to understand the share market is to understand stocks. A share of stock is the smallest unit of ownership in a company. If you own a share of a company’s stock, you are a part owner of the company. You have the right to vote on members of the board of directors and other important matters before the company.
If the company distributes profits to shareholders, you will likely receive a proportionate share. One of the unique features of stock ownership is the notion of limited liability. If the company loses a lawsuit and must pay a huge judgment, the worse that can happen is your stock becomes worthless. The creditors can’t come after your personal assets. That’s not necessarily true in private-held companies.

There are two types of stock:
•Common stock
•Preferred stock

Most of the stock held by individuals is common stock.

Common Stock
Common stock represents the majority of stock held by the public. It has voting rights, along with the right to share in dividends. When you hear or read about “stocks” being up or down, it always refers to common stock.

Preferred Stock
Despite its name, preferred stock has fewer rights than common stock, except in one important area – dividends. Companies that issue preferred stocks usually pay consistent dividends and preferred stock has first call on dividends over common stock. Investors buy preferred stock for its current income from dividends, so look for companies that make big profits to use preferred stock to return some of those profits via dividends.
There are many types of shares from which some of them are :
•Authorized Shares – These shares represent the total number of shares of stock authorized when the company was created. Only a vote by the shareholders can increase this number of shares. However, just because a company authorized a certain number of shares doesn’t mean it must issue all of them to the public. Most companies retain shares for use later called unissued stock or shares.
•Unissued Shares – Shares a company retains in its treasury and not issued to the public or to employees are unissued shares.
•Restricted Shares – Restricted shares refer to company stock used for employee incentive and compensation plans. Restricted stockowners need permission of the SEC to sell. There is a waiting period after a company first goes public where insiders’ restricted stock is frozen. When insiders want to sell their stock, they must file a form with the SEC declaring their intention. Even insiders of established companies must file with the SEC before selling their restricted stock.

•Float Shares – Float refers to the number of shares actually available for trade on the open market. You and I can buy these shares.

•Outstanding Shares – Outstanding shares includes all the shares issued by the company, which would be the restricted shares plus the float.

Learn more about best stocks to buy right now and top stocks to buy.

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