Stocks

In financial markets, stock is the capital raised by a corporation through the issuance and distribution of shares. A person or organisation which holds at least a partial share of stocks is called a shareholder. In the United Kingdom and Australia, the term share is used the same way, but stocks there refer to either a completely different financial instrument, the bond, or more widely to all kinds of marketable securities.

The first company to issue shares of stock was the Dutch East India Company, in the early 1600’s. The concept of joint ownership made Europe's economic growth possible following the Middle Ages. The technique of pooling capital to finance the building of ships, for example, made the Netherlands a maritime superpower. Before adoption of the joint-stock corporation, an expensive venture such as the building of a merchant ship could be undertaken only by governments or by very wealthy individuals or families.

Common stock, also referred to as common or ordinary shares, are, as the name implies, the most usual and commonly held form of stock in a corporation. The other type of shares that the public can hold in a corporation is known as preferred stock. Common stock that has been re-purchased by the corporation is known as treasury stock and is available for a variety of corporate uses.

Common stock typically has voting rights in corporate decision matters, though perhaps different rights from preferred stock. In order of priority in a liquidation of a corporation, the owners of common stock are near the last. Dividends paid to the stockholders must be paid to preferred shares before being paid to common stock shareholders.

Preferred stock, sometimes called preference shares, have priority over common stock in the distribution of dividends and assets.

Most preferred shares provide no voting rights in corporate decision matters. However, some preferred shares have special voting rights to approve certain extraordinary events (such as the issuance of new shares, or the approval of the acquisition of the company), or to elect directors.

In the United States, the term penny stock refers to any stock trading outside one of the major exchanges (NYSE, NASDAQ, or AMEX). However, the official Securities & Exchange Commission definition of a penny stock is a low-priced, high risk security of a very small company. The term is sometimes used interchangeably, however per the SEC definition, penny stock status is determined by share price, not market capitalization or listing service.

There are various methods of buying stocks. The most common means is through a stock broker., they arrange the transfer of stock from a seller to a buyer. Most trades are actually done through brokers listed with a stock exchange, such as the New York Stock Exchange.

Another way is to purchase directly from the company itself. If at least one share is owned, most companies will allow the purchase of shares directly from the company through their investor relations departments.

Financing a purchase of stocks there are two ways: purchasing stock with money that is currently in the buyers ownership, or by buying stock on margin. Buying stock on margin means buying stock with money borrowed against the stocks in the same account.. Borrowing is not free; the broker usually charges 8-10% interest.

Selling stock is procedurally similar to buying stock. Generally, the investor wants to buy low and sell high, if not in that order (short selling); although a number of reasons may induce an investor to sell at a loss.

As with buying a stock, there is a transaction fee for the broker's efforts in arranging the transfer of stock from a seller to a buyer. This fee can be high or low depending on which type of brokerage, discount or full service, handles the transaction. After the transaction has been made, the seller is then entitled to all of the money. An important part of selling is keeping track of the earnings. Importantly, on selling the stock, in jurisdictions that have them, capital gains taxes will have to be paid on the additional proceeds, if any, that are in excess of the cost basis.

A stockholder is an individual or company who owns one or more shares of stock in a joint stock company. Companies listed at the stock market strive to enhance stockholder value.

Stockholder holders are granted privileges depending on the class of stock, including the right to vote on matters such as elections to the board of directors, the right to share in distributions of the company's income, the right to purchase new shares issued by the company, and the right to a company's assets during a liquidation of the company.

Stockholders are considered by some to be a partial subset of stakeholders, which may include anyone who has a direct or indirect equity interest in the business entity or someone with even a non-pecuniary interest in a non-profit organization. Thus it might be common to call volunteer contributors to an association stakeholders, even though they are not stockholder

The New York Stock Exchange (NYSE), nicknamed the "Big Board," is a stock exchange. It is the largest stock exchange in the world by dollar volume and the second largest by number of companies listed. The NYSE trades in a continuous auction format. There is one specific location on the trading floor where each listed stock trades. Exchange members interested in buying and selling a particular stock on behalf of investors gather around the appropriate post where a specialist broker, who is employed by a NYSE member firm , acts as an auctioneer in an open auction market environment to bring buyers and sellers together and to manage the actual auction. . The human interaction and expert judgment as to order execution differentiates the NYSE from fully electronic markets. However, in excess of 50% of all order flow is now delivered to the floor electronically

NASDAQ (National Association of Securities Dealers Automated Quotations) is an stock exchange. It was founded in 1971 by the National Association of Securities Dealers (NASD), who sold it in 2001. It is owned and operated by The Nasdaq Stock Market, Inc. (NASDAQ: NDAQ) the stock of which was listed on its own stock exchange in 2002. NASDAQ is the largest electronic screen-based equity securities market in the United States. With approximately 3,200 companies, it lists more companies and, on average, trades more shares per day than any other U.S. market.

The American Stock Exchange (AMEX) is situated in New York. AMEX is a mutual organization, owned by its members. The Exchange traces its roots back to colonial times when stock brokers created outdoor markets to trade new government securities. The AMEX started out as such a market at the curbstone on Broad Street near Exchange Place. AMEX's core business has shifted over the years from stocks to options and Exchange-traded funds, although it continues to trade small to mid-size stocks In 1998, the American Stock Exchange merged with the National Association of Securities Dealers to create "The Nasdaq-Amex Market Group" where AMEX is an independent entity of the NASD parent company.

A stock market crash is a sudden dramatic decline of stock prices across a large section of a stock market. Crashes can be driven by panic as much as by underlying economic factors. The most famous crash, the Stock Market Crash of 1929, took place in October 1929. After a series of price declines in early October, the market plunged dramatically on October 24. This was followed by Black Monday and Black Tuesday on October 28 and October 29. At the close of the week of September 3, 1929, the Dow Jones Industrial Average stood at 377. By the end of the week the index stood at 228, a drop of 39.5 percent.