The opportunity to profit from stocks can be very attractive, but it also comes with risks. That's why it's important to understand What is stock? very important. Understanding the concept of what stocks are is the first step for you to learn and participate in the stock market more proficiently.
1. What is the concept of stocks?
To answer the question What is stock? According to Clause 1, Article 121 of the Enterprise Law, "A share is a certificate issued by a joint stock company, a book entry or electronic data confirming ownership of one or more shares of that company."
Understandable, Stock is a certificate of investment amount and shares are ownership in the company you invest in. The owner of shares is a shareholder or one of the owners of the issuing company.
Stocks are an important concept in finance and investment. In Vietnam, stocks are listed on stock exchanges, such as the Ho Chi Minh City Stock Exchange (HOSE) or the Hanoi Stock Exchange (HNX). The value of stocks can fluctuate over time based on many factors, including the company's business performance, industry information, and the general economic situation.
Stocks are an important concept in finance and investing.
2. Stock classification
To understand more about What is stock? You need to classify stocks. Currently, joint stock companies often issue two types of stocks: common stocks and preferred stocks.
Common stock (common stock): When owning common stock, investors have the right to freely buy, sell and transfer, attend shareholders' meetings and vote on important issues in the company. In addition, shareholders receive dividends based on the business performance of the enterprise and the number of shares held.
Preferred stock: Depending on each type of preferred stock, shareholders will enjoy priority rights for that type of preferred stock and other restrictions compared to common shareholders. There are three common types of preferred stock including:
- Dividend preference shares: Owners of dividend-preferred shares will be given priority in receiving higher dividends than common shares. However, investors of dividend-preferred shares will have limited rights to attend meetings, vote or nominate people to the Board of Supervisors and the Board of Directors.
- Redeemable Preferred Stock: When owning redeemable preference shares, investors have the privilege of getting their capital back. The capital refund will depend on the conditions agreed with the company or when the shareholder requests. In addition, shareholders owning redeemable preference shares also have the right to speak, attend the General Meeting of Shareholders and have the right to vote.
- Voting preference shares: For this type of stock, investors will have the same rights as common shareholders, including the right to vote, attend meetings, and nominate people to the Board of Directors or Supervisory Board. In particular, when investing in voting preference shares, investors will own more votes than common shares. However, on the contrary, the right to transfer those shares to others will be limited.
3. Characteristics of stocks that attract investors
Attractive long term returns is one of the important reasons why many investors choose to invest in stocks. When investing in stocks, you actually become a shareholder of the company. Compared to the fixed profit of about 6-7% per year when saving, the stock market has an average growth rate of up to 20% per year. Managing the investment portfolio to select companies with high growth potential helps investors benefit from dividends and stock price appreciation.
Stocks are considered the most liquid asset after cash. The concept of liquidity refers to the ability to convert assets into cash, and the stock market is where many buyers and sellers gather. High liquidity allows investors to buy and sell stocks quickly, and assets can be converted into cash efficiently.
Stocks offer flexibility to investors. It does not require a large amount of money to start investing, compared to investing in real estate, investors can participate in the stock market with a small amount of money. The time to hold stocks is also more flexible, with the ability to buy and sell stocks in a short period of time. Shareholders can sell stocks when the price increases to the expected level without having to wait a long time like many other forms of investment.
4. Regulations on stock ownership
Ownership of stocks and bonds in the securities sector has unique characteristics compared to ownership of other types of assets. Securities are defined as special assets of the securities market, a type of property right under Article 181 of the Civil Code, certifying the legal rights and interests of the owner to the assets or capital of the issuing organization, often expressed in the form of certificates, book entries or electronic data (according to Clause 1, Article 6 of the Securities Law).
According to the provisions of the Enterprise Law 2005, the status of shareholders of a joint stock company is determined based on the ownership of shares. A joint stock company establishes and maintains a shareholder register as a document proving the ownership of shares of each shareholder. Shares are issued to confirm the ownership of one or more shares of the company.
Currently, stock ownership are mainly regulated by the Civil Code, the Enterprise Law, and the Securities Law. Therefore, securities ownership rights usually include the right to possess (hold, manage), the right to use (exploit the utility, enjoy the benefits, profits), and the right to dispose (transfer ownership, abandon ownership).
It can be said that, basically, securities ownership includes the following rights:
- Right to receive profits from owning securities: This is the right of the securities owner arising from the characteristics of profitable securities. It can be said that, depending on the purpose of the securities owner, they can receive profits from different perspectives. If the securities owner intends to hold the securities for a long time, the profit received will be interest (if owning bonds), or dividends (if owning stocks) paid by the issuing organization (however, it also depends on conditions such as the operating efficiency of the issuing company, etc.).
- The right to attend and speak at the General Meeting of Shareholders and the right to vote directly or through an authorized representative (except for shareholders owning dividend preference shares and redeemable preference shares): This is a basic right for shareholders as well as owners of joint stock companies. Current laws have provisions to ensure this right such as: extension of the annual General Meeting of Shareholders (may not exceed 6 months from the end of the fiscal year), convening extraordinary General Meeting of Shareholders, notice of attendance, procedures for convening General Meeting of Shareholders, recommendations on content related to the meeting agenda, etc.
- Right to information: This is a special right of the securities owner compared to the ownership of other types of assets. When owning a certain security, the owner has the full right to enjoy the benefits brought by the security. Securities owners who want to exercise their powers such as the right to decide on securities (when buying, selling, transferring) often have to rely on certain information about the organization issuing the securities, about the number of securities and the price of the securities being traded on the market...
- The right to freely transfer, buy, sell securities (depending on the type of securities), the right to donate, inherit securities: This is the basic right of the securities owner, associated with the liquidity of the securities.
- Right to pledge securities and conduct repo transactions: Securities owners have the right to borrow capital from organizations and individuals and use securities as collateral to secure the repayment obligation for those loans.
- Right to contribute capital by securities to establish a company: This is also the right of the securities owner. When exercising this right, the conditions on capital contribution and determination of the value of capital contribution must be complied with according to the provisions of the Enterprise Law.
- Right to preemptive purchase of newly offered shares corresponding to the proportion of common shares of each shareholder in the company. When the company is dissolved or bankrupt, the shareholder receives the remaining assets corresponding to the number of shares contributed to the company.
- Right to file a petition to open bankruptcy proceedings for a joint stock company For shareholders or groups of shareholders owning more than 20% common shares for at least 6 consecutive months, unless otherwise provided in the Company Charter.
- Securities ownership in some special cases: Securities ownership on special trading days (when the company closes the list to exercise the right to purchase additional issued shares, pay dividends, etc.): buyers after the trading day do not enjoy the rights arising from the securities that belong to the previous securities owner, even though the time of transfer of rights occurs after the time of transfer of ownership.
Stock ownership has unique characteristics compared to ownership of other types of assets.
5. How to make profit from stock investment?
Investing in stocks can bring attractive profits if done intelligently and carefully. First, the most important thing is to have a solid knowledge of the stock market and the businesses you want to invest in. With the right understanding and strategy, investing in stocks can bring attractive profits. Investors can make profits when participating in stock investment in 2 ways:
- Dividend income: When becoming a shareholder, investors will receive dividends from the investing enterprise, if the operating results of that enterprise are profitable. After setting aside funds according to regulations, dividends are a part of the after-tax profit distributed to investors.
For example: Stock code: VNM - Vietnam Dairy Products Joint Stock Company is a typical enterprise that pays quite generous cash dividends to shareholders.
- Profit from stock arbitrage: It can be understood that investors buy stocks at low prices and sell them at high prices. Taking advantage of fluctuations in market supply and demand, stock investors can trade stocks based on the difference between the buying price and the selling price to earn short-term profits.
For example: In 2021, in less than a year, FPT stock price grew to 93%, investors earned huge profits when owning this stock.
Conclusion: Be careful when investing in stocks
Before deciding to invest in stocks, it is important to learn What is stock? It is very necessary and important to avoid unwanted risks. Although stocks bring attractive profit opportunities, they also come with high risks. Every investor should have a thorough understanding of the types of stocks they intend to invest in.
High returns can come from careful research and investing in companies with growth potential. To avoid costly mistakes, investors should always remain vigilant and never invest in things they do not understand. Using Onstock tools for technical and fundamental analysis, following news and market events are key factors in success in investing. stock investment. Responsibility and patience are the keys to surviving and thriving in the challenging environment of the stock market.
Source: Onstocks
