What are stocks?
Stock is a security that you buy and means that you own a piece or a share of the company assets and earnings.
There are two main types of stock:
-Common: This normally gives the owner of the stock the right to vote at shareholders meetings, and in the case of profit it also entitles the owner of the stock to receive dividends, that are a good source of income.
-Preferred: with this stock you normally don’t have voting rights, but it may receive a dividend, and in this case it has a priority over the common stock to receive the dividends and in case of liquidation you also have a priority to receive any payments.
How to buy stocks?
Stocks are a effective way to invest in a company. In order to invest in stocks you need a to have a account with a broker.
Nowadays many brokers offer you the possibility of having a home broker, it is basically a software or a web based program where you can buy and sell the stocks for yourself, you can normally also trade on the phone, but this normally carries a higher cost, although it is good if you have this possibility in case you have a problem with your computer or internet connection.
This brokers will charge you a commission for each trade you make and depending on the market you are trading there might be some additional fees.
It is highly recommended for you to buy stocks of bigger companies as they tend to be more liquid offering a better condition for you to sell at any time you want for a descent price. This are the so called blue chips.