Stock market and stock types

The stock market is important part of a retirement plan. While there are some risks associated with them, they do have the potential to have a generous payout. There are two main types of stocks; the common stock and the preferred stock.

A common stock is just as it sounds, a stock that is commonly available. Most stocks available fall in this category. These stocks provide a piece of ownership in the company. They also give you a claim to a portion of the profits of a company. 

By holding this type of stock, you are also given a vote per share you own in the company. This vote allows you to elect the board members who oversee the operations of the company. This type of stock does have the potential to create capital growth, provide higher returns and give you a strong earning potential.

In turn, the preferred stock offers some ownership in the company. However, there are no voting rights. But you do receive a fixed dividend for the life of the company. With this type of stock, you are paid out before other investment types, meaning that you are making a profit.

An additional breakdown of stocks is possible and falls under stock classes. This gives certain holders more privileges than others. The most common are Class A or Class B. The ticker symbol usually reads ABCa and ABCb on the ticker and allows investors to follow their unique stock market options.

The stock market management

To better manage your investments, there are a few characteristics you need to note. They are found in the following terms:

Risks and returns are a part of stocks. When there are changes in the economic and competitive environment of a company, it impacts their profits and their stock market prices. Companies in a strong place offer strong returns for their investors while those in a volatile market may have an increased risk associated with them. This risk may involve losing money on your investment.

Stocks are volatile. Their prices will change in a short period. Different real life scenarios do impact them. Major news events, government economic reports, and other situations can drive prices higher and cause a company’s stock to crash suddenly.

All stocks are regulated to ensure that they remain fair. In the United States, this is handled by the U.S. Securities and Exchange Commission, along with the New York Stock Exchange and other markets. This ensures that investors and market participants are provided the information they need promptly.

So how do you buy and trade stock? The answer is through a stockbroker. This individual monitors the market and buys and sells shares at your discretion. Brokerage firms are places like Charles Schwab, or they come in the form of online investment websites like E-Trade.

When you consult with your broker, you tell them how many shares you’d like to buy or sell in a company. You may choose to do a market order where you request to make a stock purchase at the prevailing market price. You also may choose to buy a stock at a limited price through a limited order. For this, a broker will make a purchase for you when the market reaches a certain point. So if a stock is currently at $80 and your limit order is $70 the broker will wait until the stock reaches $70 to make the purchase.

The stock market is a great way to invest money for retirement. Just make sure you take the time to monitor stocks and learn to read the stock market before you make your first investment as there are some risks. Doing this helps you to make sound investments that may just pay off.

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