Candlestick Trading Blog

---

They are often referred to as stock of a corporation but they can also represent ownership of other financial asset classes such as mutual funds. They represent ownership bought in units and shareholders are entitled to an equal distribution of profits. The profits are paid out in the form of dividends.

Common Shares / Stocks
When you buy common stock in a company you become part owner of the company and will see the value of your investments rise as long as the business performs well and makes a profit. As a shareholder you have a right to the company's profits and the more money the company has left over after it has paid all of its debts, the more your share of the company is worth. Investing in stock is generally risky because if the company that you invest in fails, then you could potentially lose all of your investment. Look for bigger companies that have a proven track record and are more established to reduce your risk. You can also look into technical analysis as a method of analyzing and tracking stock price movements. The benefit of investing in the stocks is that overall stocks give investors the highest returns than most other types of investments.

Preferred Shares / Stocks
Preferred stock is a type of stock that regularly pays out a set amount of money out of the company's profits in the form of dividends. They are called "preferred" because you get preferential claim to the profits ahead of the common shareholders. They come with many features that are similar to bonds. There are convertible preferreds and retractable preferreds. Convertible preferreds let the investor exchange their preferreds for the company's common stock. Retractable preferreds allow the investor to turn in the stock to the company at a specific price during specified times. These are risky because they react to changes in the interest rate. If the interest rates rise you have to sell and could get less than what you paid for in order to sell competitively. However, you are in line before shareholders to collect profits if the company performs poorly. Additionally, the yields are higher than those of other fixed income investments like bonds.

Continue to research investment fundamentals to find methods of analysis that work for you. Some investors opt to practice fundamental analysis while more active traders utilize methods taken from technical analysis. Research both and determine what methods are inline with your risk tolerance and investment philosophy.

Website Specials