Beginner's Guide To Common Stock
In this video, I’m going to be telling you all about common stock.
What is common stock?
Common stock is a security that represents ownership in a corporation.
For example, if a corporation issues 100 shares of common stock, each share represents 1% ownership meaning by you owning 30 shares, you own 30% of the company.
With these shares, you’re entitled to a portion of the company’s earnings.
Benefits of owning common stock
#1. You have certain rights
Vote for corporate directors
Companies have shareholders meetings where you can come in and cast your vote; however, if you can’t attend the meeting in person, you have the option to vote by proxy.
Shares are freely transferrable
You have the right to sell or give away shares without permission from the company.
Receive a copy of the company’s annual report
Preemptive right to maintain a proportionate share of ownership.
#2. Growth
When you buy common stock, it has the ability to increase in value due to the increase in market price which is also known as capital gains or capital appreciation.
Because returns are usually higher than the rate of inflation, long-term investors use common stock as a hedge against inflation.
#3. Income
Cash dividends
Many companies pay out cash dividends each quarter that are declared by the BOD and may increase over time.
Stock dividends
Additional shares in the company
Property dividends
Shares in a subsidiary company or a product sample
Risks of owning common stock
#1. Market risk
Yes stock prices tend to go up, but there’s also the chance that the price will go down.
#2. Decreased or no dividend income
If the company that pays dividends loses money that year, the amount of dividends paid could be decreased or cut out all together for that year.
#3. Low priority at dissolution
If a company goes bankrupt, common stockholders are the last to be paid.
Liquidation Order
IRS (taxes) and employees (unpaid wages)
Secured debt (bonds and mortgages)
Unsecured liabilities and general creditors
Subordinated debt (debtholders who agreed to be paid last)
Preferred stockholders
Common stockholders
Time Stamps
00:00 - Intro
00:31 – What is Common Stock?
01:00 – Benefits
05:35 – Risks
06:27 – Liquidation
07:22 – Recap
07:54 – Outro
Sub Count: 1,187
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