Before investing in the stock market, many people want to learn more about it. stock characteristicsLet's find out with HVA today.
General characteristics of stocks
It can be said that stocks are not simply a part of ownership of a business, but they also contain many meanings as well as many different purposes for businesses and investors. So before deciding to invest, you should also learn carefully about stock characteristics to be able to grasp the most basic information about stocks.
No repayment and no maturity: This is one of the Common stock characteristics is considered the most obvious. Stocks are confirmation of investors' capital contribution to their business, so they do not have any fixed term. And at the same time, investors will not be refunded the amount they contributed even if the company goes bankrupt, this is also something to consider before investing in stocks.
- Non-fixed dividend: The dividends that investors receive from stocks will not be fixed but will depend on the business situation of that company. In cases where business results are good, investors will receive a larger amount of dividends and vice versa, if the company makes a loss, the dividends that investors receive will also be less.
- Prices fluctuate: Because the price of a stock will be affected by many factors around it such as the macro environment, the situation of the business or the economy, so it will always fluctuate corresponding to the changes of these factors. Stock prices will not be fixed but will fluctuate at different time periods.
- Liquid: This is also one of the outstanding features of stocks. And stocks are considered one of the most liquid investment products today. So investors can easily sell stocks and receive the corresponding amount of money.
- Good circulation: In addition to liquidity, stocks also have good circulation, which also means you can freely give and inherit them to others as desired.
- High risk: When deciding to buy stocks, it also means that investors will have to face the risks that come with it. Because the price of stocks will always fluctuate according to the market, if you know how to choose the right time to buy or sell, otherwise investors will have to face the risk of heavy losses. Therefore, investors also need to pay attention to Market News more.
Characteristics of preferred stock
Owners of preferred shares will be considered as official preferred shareholders of the company. And then they will have priority in dividends as well as voting rights in meetings. And that is also the most obvious difference for other Common stock characteristics. So those Features of Preferred Stock What is that?
- First, similar to bonds, the par value of preferred shares will be different from the par value of common shares which only have nominal value. The par value of preferred shares is considered very important because the dividend of this type of stock will be set at a fixed rate on the par value and it has a very important meaning in distributing fixed dividends. Because the rate of return of preferred shares will not change over time, the price of preferred shares will also change up or down or higher when the required rate of return for it in the market will not change.
- Second, in a period without earnings, no preferred dividends are payable. However, any unpaid preferred dividends will be accumulated and settled for payment in subsequent periods and such inheritances will be considered as outstanding debts of the company. In any event, preferred dividend debts will be paid before any common stock dividends occur.
- Third, preferred shareholders do not have voting rights, but in some cases they are entitled to elect certain members of the board of directors of a company where preferred dividends are not paid.
- Finally, what is also considered the biggest benefit of owning preferred stock is the ability to return capital more than common shareholders.
Characteristics of treasury stocks
Treasury stocks are a type of stock issued by joint stock companies and then these companies will use legal capital to buy back and hold like other investors. And treasury stocks will include the following characteristics.
The first outstanding feature is that treasury stocks will not be paid dividends in cash and will not be rewarded or paid dividends in shares. In addition, when playing treasury stocks, there will be no right to vote on company issues as well as no right to buy new shares or preferred shares. In addition, it is not included in the income per share and the capital will not be returned when the company is liquidated.
In addition, before deciding to invest in treasury stocks, you should also learn about the characteristics of treasury stocks that the total number of treasury stocks must not exceed the capitalization ratio and when the company buys back treasury stocks, it can also cancel the treasury stocks or can retain and sell them on the market when investors need capital. Finally, when buying or selling treasury stocks, businesses will not record profits or losses but only record a decrease in capital sources as well as surplus shares.
Characteristics of the stock market
Can say characteristics of stock market or generally called the stock market will include the following characteristics:
- Liquidity: This is definitely something that cannot be ignored when talking about the stock market. Liquidity is also known as the ability to convert securities into cash and vice versa. Normally, stocks or bonds can be converted into cash within just one to two days without having to wait too long. And one thing is for sure, as the market develops, liquidity will increase day by day.
- Risk calculation: because securities in general or stocks in particular are assets that are greatly affected by external factors and will face risks at any time, such as the most common risks such as market risks, political risks, liquidity risks or asymmetric information risks, in addition to many other risks.
- Profitability: This is something that everyone knows and is especially interested in, or is the main reason why investors choose to invest in stocks. As an investment channel, the stock market is profitable. And all stock investors want and expect to receive a larger source of income in the future. And these sources of income will come from dividend sharing or from fluctuations in stock prices.
When deciding to invest, investors must update and equip themselves with investment knowledge as well as knowledge related to the type of securities they invest in and stocks are no exception. Because only then will investors have the opportunity to have high profits.
Hope the above information is helpful. HVA will be able to help readers have more information as well as better understand about stock characteristics and the stock market more clearly. HVA wishes you success with your future investments.
