What is stock and its types

Invesment Stocks

Definitions and Explanation

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The word ‘stock’ is derived from the Old French estoc, meaning “a stick”, “a piece of wood”. There are two types of stock, short term for trading purposes which have a limited lifespan until they no longer hold any value due to changing market trends. While long term stocks are less likely to be affected by changes in market trends because they typically stay in desired customers hands for an extended period of time. Thus the ability to buy or sell them becomes limited as well as their value during that time frame. Stocks are issued on the primary market by companies who wish to raise capital through investors purchasing shares at par value. Additionally, all companies whose common or preferred shares are listed on an exchange must issue a prospectus and/or annual report and financial statements.

The Stock shares

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Stock shares of any company held by its employees as part of their remuneration or those that were granted as part of an incentive/retention program are called warrants. These shares may not typically trade on the public markets for extended periods after the initial offering has been made. Warrants may be traded privately among large investors such as investment banks and other institutions.

A stock is a share of capital stock of a corporation. Stock represents proportional ownership in the corporation by shareholders which they can sell to another shareholder if required to do so – fractional ownership is possible if more than one person holds shares and there will generally be restrictions on who can transfer them, according to the articles of association.

Security signifies an ownership position in a corporation or financial instrument such as preferred or common stock. Dividends are typically paid in the form of cash, issuing additional stock shares (known as scrip dividends), or other property. Ownership of equity shares gives the shareholder certain rights and protections including:

The right to attend shareholder meetings and vote on matters such as board seats, executive compensation, dividend payments etc. The right to share in company profits through dividend payments The protection offered by limited liability if the company goes bankrupt – while employees would lose their jobs, holders of shares would only lose the cash they originally invested in them The right to convert bonds into equity shares A person can buy a certain number of stocks in a company, but due to the relative size of each stock will hold an infinitesimal percentage of that companies total outstanding shares.


A person who owns stocks is called a shareholder. Shares are grouped into classes with each class having unique features and characteristics depending on the type of share issue it belongs to (e.g., common or preferred stock). The holder of common stock ordinarily has the right to vote for members of the board of directors and other matters decided by the shareholders at its annual meeting, receives any remaining profits after dividends have been paid to preferred shareholders, and has unlimited liability for the debts incurred by firms. An equity security that entitles its owner to an ownership interest in a corporation via certificates issued by officers directors – these shares belong to a corporation and not the individual who paid for them.

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