Stocks

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The quoted shares are those that can be sold and bought freely in an official secondary market (Stock Exchange). Companies that put them into circulation must meet certain requirements. This is very important for an investor, because it allows him to undo the investment at any time and receive in return an objectively established selling price (the market price), without having to search for a buyer for the shares himself.

Stocks are securities as well as bonds. The difference between a share and a bond or obligation lies in the fact that the share gives ownership of the company’s assets in the proportion that the nominal value of that share represents in relation to the total share capital, whereas the bond or obligation only confers a credit claim on the debt of the issuing company.

In the primary market, the company creates new shares and invites investors to buy them, making them proprietary partners (shareholders) and solving their financing problems. It occurs whenever the company is constituted and capital is increased, for which the number of shares in circulation is increased.

The secondary equity market consists of stock exchanges, where investors trade (buy and sell) quoted shares already in circulation with other investors who want to sell or buy them. The vast majority of transactions occur in this secondary market.

Except for exceptions, as for example with preferential shares, a common or ordinary share gives its right holder to cast a vote at the Shareholders’ Meeting. This Board is in charge of appointing a director or a Board of Directors for the company and adopting the strategic decisions of the same. Therefore, the more shares you own, the more votes you have and the greater the decision-making power of your owner.

Risk is an inherent characteristic of equity securities. Risk means uncertainty. You do not know what profitability (dividends and / or capital gains) you can get from your investment. The profitability may be much lower or much higher than expected.

In general, when talking about the risk of equities, it is generally considered only the price risk, since it is understood that the rest of the risks (insolvency, inflation, interest rate, exchange rate …) are already included in it. That is, the main risk of an investment in shares is that they lower their price. If you had to sell your shares when the quote goes down, you could lose some or almost all of the capital invested.

The shares represent a stake in the ownership of the company; a part of the total value of this, (in a common pool of investments, a share-share). But for some investors it is simply a title that gives the owner rights over the dividends; and the possibility of participating in the profits of the company, according to the patrimony that the shareholder holds. It also depends on when the organization decides to liquidate these gains, since they could be reinvested if the board of directors of the company so determines.

Investment in stocks should be considered with a view to the medium and long term. Equities have been the most profitable asset category in the long run. In the short term, however, it is a risky investment because of its high volatility.

Volatility is a way of measuring risk and refers to the large price and profitability variations suffered by a market, index, portfolio or financial asset. If an asset goes up or down a lot in a short time, it is said to have high volatility.

The effect of volatility tends to decrease with time. Therefore, the long-term investor should not be overly alarmed by the daily fluctuations of the markets. Never invest in stock money you will need in the short term.

What definitively determines the quotation of some shares is the supply and demand in the market. A company issues a limited amount of securities, so if there are more buyers than sellers, its price will rise.

The supply and demand depend on the valuation that the investors make on the company that issues the shares. The main factors on which this valuation depends are expectations about the future profitability of the company, its rate of growth and the expected evolution of interest rates. And other more general factors also influence, such as expectations about economic developments and investor confidence.

Almost all shares traded on the stock exchanges are ordinary shares, which we have described so far. They are entitled to participate in the distribution of profits and in the assets resulting from a liquidation, to the preferential subscription in the issuance of new shares or obligation

 

The supply and demand depend on the valuation that the investors make on the company that issues the shares. The main factors on which this valuation depends are expectations about the future profitability of the company, its rate of growth and the expected evolution of interest rates. And other more general factors also influence, such as expectations about economic developments and investor confidence.

Almost all shares traded on the stock exchanges are ordinary shares, which we have described so far. They are entitled to participate in the distribution of profits and equity resulting from a liquidation, preferential subscription in the issuance of new shares or bonds convertible into shares, to attend and vote at general meetings of shareholders and to challenge agreements social.

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