Common questions about stock

What are stock?

Stocks are an ownership stake in a company.

Is it true that I own a piece of a company if I own stock

Yes. As a stock owner you own a piece of the company. How large your piece is depends on how many shares the company has in total. The more shares the company has the smaller your stake in the company. Most companies have millions or even billions of shares. Your ownership from owning one or a few shares is hence very small. It is easy to find out how many stocks a certain company has by googling it. You can also find the information on the stock page in your brokers trading platform. Please keep in mind that a company can have several different types of stock and you need to look at all the different type of stock to find the total number of stocks.

Do I have the right to a part of the profit if I own stock?

Yes and no. You have a right to a part of the profit if the company decides to pay any dividend that year. But you do as an individual share holder not have the right to demand that the company pay you a dividend if they do not plan to do so. A larger collective of share holders owning a combined ownership of more than 50% of the company can demand that the company pay a dividend by bringing up the issue and voting on it at the annual shareholders meeting.

How do I buy stock?

It is easy to buy stock. Most online stock brokers offer trading platforms that are very easy to use. If you use internet as a part of your daily life then you will have no trouble figuring out how the platforms work and how you buy a stock. Most platforms contains a number of more advance functions that you can use when you feel ready to do so but you do not need to use these to buy or sell stocks.

The first thing you need is an account with a stock broker. There are a large number of different brokers to chose form. I recommend that you choose a cheap online broker. Low trading fees can make it a lot easier to make money if you are going to buy and sell stocks for small amounts of money.

Once you have an account you need to deposit money to it. Once you have money in your account you are ready to buy your first share. Find the company you want to buy shares in and click on it. This will open an info page where you can find more info about the stock. This page will also allow you to buy stock in that company.

Most platforms are very intuitive and make very easy to buy and sell stocks. This is true even if you never done it before.

How do I chose a stock broker?

There are plenty of stock brokers to chose from and many of them offer trading on the same stock markets. Which one you choose will usually not make much difference. With that said. I assuming that you are new to stocks since you are asking this question. If you are new to stock then you should likely chose the broker with the lowest fees. Other brokers might include other tools etc in the price but it is unlikely that you are going to need them when you first get started. You can move your stock to another broker when you feel you need a more advanced account or if you feel that another broker would be a better option for you.

What are dividend stock?

Dividend stocks are stocks that pay their owner a dividend. A dividend is a cash payment and a way to transfer the companies profit to the owners. Many but not all companies pay dividends.

The term dividend stock does technically include all stocks that pay a dividend but the term is more commonly used to refer to stock that give a high dividend. Dividend stock is a favorite among investors that want to get a yearly return on their stock without having to sell them. They are also a very good option for retirement portfolios as they can give you money to retire without the need to sell assets. You never have to worry about your nest egg running out since you only live on the dividends. You do not diminish the value of your portfolio.

What are penny stock

A penny stock is an stock with the market value of less than USD1. This does not say anything about the market value of the entire company. The company can still have billions of shares and be worth billions. Penny shares are often very volatile and favored by traders who are willing to assume more risk in the hope to make more money. It is possible to make and lose money quickly when trading with penny stock. Most beginner investors should stay clear of these stock for more safe alternatives.

Is it hard to earn money with stock?

No. It is very easy to make money on the stock market as long as you are not greedy. It is easy to make money by adopting a long term strategy where you invest in high quality stocks in large stable companies. If you on the other always try to find the next big penny stock then it can be very hard to make money.

What is diversification?

Diversification is a risk management strategy. This strategy is based on the assumption that a single stock is more likely to be affected by an unpredictable event than a number of different stocks in different industries are. By investing in a lot of different stocks instead of just one you reduce the risk and maximize the chance that you are going to earn money on the stock market.

If you invest all your money in a bad stock then that can be very expensive. If you on the other hand invest in 10 stocks and one of those are bad then your loss will be limited and hopefully the other stocks will gain enough in value to make you whole again.

What is the best stock to buy?

There is no good answer to this question. It depends on a million different factors and no one knows the future so no one knows which stocks that is going to be the best stock in the coming years. Your goal should not be to find the best stock. Your goal should simple be to be build a portfolio of a number of different good stocks. That is going to be easier and safer than trying to find the best stock.