Stock Broker Training: What are Stocks?


Stock Broker Training: What are Stocks?; The most important thing in stock broker training and stock trading is to know and understand what stocks really are. It is essential for every stock broker to know what types of stocks there is, how they can be sold, or how to buy them.

A share of stock is the smallest unit of ownership in a company. If you own even just one share of stock, you can be considered as a part owner of the company.

The main reason for the original owners of the company to sell stocks is to gain additional funds for the company. One of the top reasons for a company to sell their stocks in the market is expansion. They would use the money to expand their operations. This is a good option rather than getting the needed money from loans that could lead them to pay high interest rates. After the initial sale of stocks, the same stocks can be sold again in the stock market.

What are Stocks?

The value or prices of stocks are affected by the company’s performance. If the company performs well, or shows promise then it would most likely do well in the future, as a consequence of this favorable public perception, the value of its stock will increase. These are good news for stockholders that have put their investments on the company’s stocks. On the other hand, if the company performs very poorly, the value of stock will decrease, thus investors can lose a lot of money. However, a stock holder would not lose his money unless he sells his devalued stocks.

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There are a lot of benefits for stock holders. For starters, stockholders can be given the right to vote on important matters regarding the company, or vote his chosen people to occupy the board of directors. Most companies also give out dividends or payments to stock holders during the end of their fiscal year.

Types of Stocks

Common Stocks

Common stocks represent the majority of stocks bought by the public. A person who owns common stocks has a right to vote and receive share of dividends. When you hear in the news stocks that are “down” or “up”, they are referring it to common stocks.

Preferred Stocks

Unlike in common stocks, a stockholder who owns Preferred Socks has no right to vote. However, they are entitled to receive dividends first before other stock holders.

A convertible preferred stock allows a stockholder to convert his preferred stocks to common stocks.

Buying and Selling Stocks

There are a lot of ways to sell or buy stocks. But the most common, and one of the easiest way to either sell or buys stocks is via the services of a certified stock broker. Stock brokers however have different types: the Full Service Broker and the Discount Broker.

Full Service Brokers

Full service brokers are the type of stock brokers that can give you expert advice on some of the stock market trends and movements. They take on a more personalized service, but they can charge a lot more as compared to discount brokers.

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Discount Brokers

Discount brokers are stock brokers that give little or no investment advice whatsoever. They usually give you information on what stocks are for sale and nothing more.

Some of the financial institutions can also function as a full service broker or a discount broker. These institutions can be anything from commercial banks to credit unions.

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