To successfully trade, you need to understand the different types available in the market. Stocks can basically be classified into common stock and preferred stock.
Common Stock
Common stock also referred to equity, shares, or, securities represent the ownership of the holder in a company. The stockholder has a right to the company's profits, which are distributed in the form of dividends. The investors also have voting rights, one vote per share, to elect the board members of the company. Given the level of risk involved with common stock, it yields higher rewards than any other form of investment securities. On the flip side, if the company is liquidated, or, goes bankrupt, the common stock holders will receive their money only after the bondholders and the preferred stockholders have been paid.
Preferred Stock
Preferred stock, like common stock, does represent some degree of ownership in a company but this type of stock is different in the sense that it usually does not come with the voting rights, though this fact may vary from company to company. The advantage of preferred stock lies in the fact that in the event of liquidation of the company, the preferred holders are paid their dues after the creditors but before the common stock holders. Also, the company has the right to purchase these shares from the owner, though at a premium, at any time for any reason. Preferred stock cannot be traded in the stock market and so the earning for these is only in the form of dividends issued by the company.
Study the market and you will find there is a bewildering kind of common shares available for trading. Depending on the time period for investment and the level of risk involved you can choose from the following types of common shares:
Blue Chips
Shares of companies whose assets, sales turnover and profits continue to grow steadily are known as blue chips. These companies have got their names from the game of poker where the blue chips have the highest value. These financially sound companies offer high quality services and are known to weather storms to deliver profits. These companies attain growth by following a policy of aggressive expansion of profitable manufacturing facilities and widening the market network. They also enjoy benefits of tax incentives for growth through expansion, mergers and acquisitions.
Growth Stocks
These refer to shares of comparatively newer players in the market who are performing outstandingly well. These will eventually mature into blue chip stocks and gradually become leaders in their product-market segments.
Cyclical Stocks
As the name suggests, these are shares of companies, which are susceptible to fluctuations, caused by economic and trade cycles. They do exceptionally well during the boom period but hit rock bottom during the bust time. Accordingly, the share prices also go up and down in a cyclic manner. Examples include automobiles, housing and travel and leisure. . Turnaround Stocks
Turnaround stock is one whose market price is lower than its intrinsic value because the company has recently gone through a bad patch. The fortunes of these companies may change or they may be taken over by more successful companies. In such a scenario, shrewd investors pick up the company's shares at relatively lower prices and reap a fortune when the prices go up.
In this article I am going to give you vital lessons on stock trading, but I must warn you though, this is for serious minded people that want to have access to fortunes in the stocks market. If you are at all inexperienced at this sort of thing, you will probably find this website most refreshing and rewarding, happy reading.
Stock trading is an aspect of stock investment which in my belief has been greatly overlooked, undermined and misunderstood. The reasons are not farfetched; I will get to that in a moment but first lets attempt to throw light to this well of gold.
I want to show you what you may be missing by not been actively involved in stock trading with statistics that may stagger your ignorance. Do you know?
1.That the Value of the Nigerian capital Market is well over N12 trillion.
2.That the current (2008) budget of the Federal Republic of Nigeria is less than N3 trillion.
3By implication, the Nigerian Capital Market (NSE) is Four times the size of what Nigeria thrives on yearly.
4That Nigerian Stocks Market is ranked as one of the highest stock market with the highest returns on investment worldwide.
5.That only 10% of active investors make over 90% (N9.18 trillion) of the N12 trillion that exchange hands daily.
6.That the Nigeria Stock Market holds the greatest opportunity for every Nigerian residing in the country and in the Diaspora to create wealth.
7.These 10% active investors are stock traders. If you want to get on the train of stock trading, there are some basics you have to grapple with in order for you to perform excellently.
SECONDARY MARKET
There are two markets where investors do business in the capital market, namely primary and secondary market. The vast majority of stock investors (90%) do their business in the primary market, why? Basically because it is an all comers market, there are no restrictions since you can do business without necessarily depending on the famed stockbrokers. At the primary market you can easily buy shares across the counter, all you need to do is pick up a form, fill your data into it and pronto you are done, in another word, some level of ignorance of how the system works can be tolerated, but not so with the secondary market, it is highly regulated by the stakeholders of the Capital market which include The Nigerian Stock Exchange, Security and Exchange Commission and Central Security Clearing System Ltd.
TRADING ACCOUNT
For starters, you need a stock trading account with the CSCS Ltd to enable you trade at the floor of the exchange; this can be easily facilitated by a currently registered stock broking firm, Trading in the secondary market is done via stock brokers. You are charged commissions for every buy and sell that is done on their behalf.
A CURRENT ACCOUNT WITH ANY BANK
A current account to facilitate your trading, when sales is made in your favour, you need a current account where you can easily pay your crossed checks into, unlike savings account that is not designed to accommodate checks.
A DOMICILIARY ACCOUNT FOR NIGERIANS IN DIASPORA
For Nigerians who resides abroad who are interested trading in the capital market, they can also actively participate. A domiciliary account can be processed for them where deposit of sales can facilitated for them; also, this account enables them to transfer money to Nigeria easily for trading purposes.
In this article I am going to give you vital lessons on stock trading, but I must warn you though, this is for severe minded masses that want to have access to fortunes in the stocks market. If you are at all inexperienced at this sort of thing, you will probably find this website most refreshing and rewarding, happy reading.
Stock trading is an aspect of stock investment which in my belief has been greatly overlooked, undermined and misunderstood. The reasons are not farfetched; I will get to that in a minute but first lets endeavour to throw light to this well of gold.
I want to show you what you may be missing by not been actively involved in stock trading with statistics that may reel your ignorance. Do you know?
1.That the Value of the Nigerian capital Market is well over N12 trillion.
2.That the stream (2008) budget of the Federal Republic of Nigeria is less than N3 trillion.
3By implication, the Nigerian Capital Market (NSE) is Four times the size of what Nigeria thrives on yearly.
4That Nigerian Stocks commercialise is ranked as one of the highest stock market with the highest returns on investment worldwide.
5.That only 10% of active investors make over 90% (N9.18 trillion) of the N12 trillion that telephone exchange hands daily.
6.That the Nigeria Stock Market holds the greatest opportunity for every Nigerian residing in the country and in the Diaspora to create wealth.
7.These 10% active voice investors are stock traders. If you want to get on the train of stock trading, there are some basics you have to grapple with in order for you to execute excellently.
SECONDARY MARKET
There are two markets where investors do business in the capital market, namely primary quill and secondary market. The vast majority of stock investors (90%) do their commercial enterprise in the primary election market, why? Basically because it is an all comers market, there are no restrictions since you can do business without necessarily depending on the famed stockbrokers. At the basic commercialize you can easily buy shares across the counter, all you need to do is pick up a form, fill your data into it and pronto you are done, in another word, some level of ignorance of how the system works can be tolerated, but not so with the secondary market, it is highly regulated by the stakeholders of the Capital market which include The Nigerian Stock Exchange, Security and Exchange direction and Central protection clarification System Ltd.
TRADING ACCOUNT
For starters, you need a stock trading account with the CSCS Ltd to enable you trade at the floor of the exchange; this can be easily facilitated by a presently registered stock broking firm, trading in the secondary market is done via stock brokers. You are charged commissions for every buy and sell that is done on their behalf.
A CURRENT ACCOUNT WITH ANY BANK
A stream account to facilitate your trading, when sales is made in your favour, you need a current account where you can easily pay your crossed checks into, dissimilar savings account that is not designed to accommodate checks.
A domiciliary explanation FOR NIGERIANS IN DIASPORA
For Nigerians who resides abroad who are interested trading in the majuscule market, they can also actively participate. A domiciliary account can be processed for them where posit of sales can facilitated for them; also, this calculate enables them to transfer money to Nigeria easily for trading purposes.
Both Micheal James & Ben Needles are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Micheal James has sinced written about articles on various topics from Investing and Trading, Fitness and Stock. Pricing and Features for Sogotrade Investment Packages:Sogotrade Interest Rates and Fees:. Micheal James's top article generates over 368000 views. to your Favourites.
Ben Needles has sinced written about articles on various topics from Business Credit Cards, Anger Control and Business Credit Cards. About the Author (text)John Efetobor is an Investment Communicator, Analyst, Investor and Businessman. He has a Stock Trading Revolution Blog where he writes informative articles on Stocks, stock trading and other Vital aspect of stock. Ben Needles's top article generates over 550000 views. to your Favourites.