What Are Stocks? Understanding Stocks

What Are Stocks? Understanding Stocks
Investing in stocks or shares can be a very rewarding venture if you know what you are doing, and you are familiar with how it works. If you don't know what you are doing, it can end up being a very frustrating and unrewarding experience.
Now, we need to define and explain exactly what stocks are:
Stocks are a share of the ownership of a company. Shares are sold initially by the original owners of a company so that they can raise more money to help the company to grow.
Putting it another way, shares can be described as paper assets that companies issue to help them raise money. When an individual decides to buy shares, he or she becomes a part owner of that company.
The owners of the company in essence sell control of the company to the share holders (share holders are those who have purchased stock in the company). Once this initial sale to share holders has been carried out, the shares can now be sold over and over again on the stock market.
There are some important facts you need to consider before you start investing in shares. Let's look at those facts:
A company that wants to sell its stocks must first be registered before it can start selling stocks. Once the company has been registered, it will be given a ticker symbol. A ticker symbol is a sort of identification tag for a stock. The ticker symbol is used mostly for placing orders with brokers and looking up information on particular company or stock. For example if you wanted to look up information on Microsoft, you could go to a website like yahoo finance or similar. Once you enter the ticker symbol for Microsoft, which is MSFT, pertinent information about the company Microsoft will be displayed. You can also do a search to find out the ticker symbol of a company.
It is widely accepted that blue chip stocks are generally the best and safest, when it comes to investing in stocks. According to the New York Stock Exchange, a blue-chip stock is stock in a company which has a national reputation for quality, reliability and the ability to operate profitably in good times and bad. In addition, blue chip stocks are guaranteed to pay dividends. A dividend can best be described as a sum of money paid regularly (usually quarterly but sometimes yearly) by a company to its shareholders out of its profits. It can also be described as the portion of what the company makes and gives to you the investor, based on the value of your stock.
Apart from blue chip stocks, there are also other types of stocks, for example, penny stocks. A penny stock is a stock that trades below $1 a share, hence the name penny stock. These stocks can be high risk and can experience high fluctuations or volatility in value. As a beginner, these are not the shares to go for, unless you absolutely know what you are doing.
If you decide to invest in stocks, it is important to invest smartly and wisely. As a beginner, don't just pick any type of stocks, pick the best. I suggest you start with blue chip stocks.

Get more free information at http://www.smartinvestorsguide.com