WHAT ARE STOCKS?
A stock is a form of security that indicates the holder has proportionate ownership in the issuing company. Companies often list their stock on the stock exchange to raise more capital to power their business operations or strategic initiatives.
Stocks offer everyday people the opportunity to invest in leading companies. Furthermore, it allows investors to have a say in the company’s direction via their stake in the company.
Categories Of Stocks
Stocks are mainly in two forms – common or preferred stocks.
Common Stocks
A common stock gives the owner the right to vote at shareholders’ meetings and receive dividends declared at the discretion of the company. The only drawback to owning this class of stock is that holders are paid last in the event of company liquidation.
Preferred Stocks
On the other hand, preferred stockholders have a higher claim on earnings than most common stockholders. In the case of bankruptcy, preferred stockholders get paid first; although they generally do not have voting rights.
Why should you consider stocks?
Stocks are a no-brainer for your portfolio asides from other familiar instruments like real estate, precious metals, etc.
Stocks can be a fair store of value. It is adequately documented that the stock market has returned an average of 10% annually. Furthermore, the S&P500 has a 10-year return of 14.43%.
You can earn from stocks in two ways —capital appreciation and dividends.
Capital Appreciation
First, when a company performs well, the company’s share price may appreciate. The differential between the price you purchased and the current share price is your capital appreciation. See the example below for how capital appreciation works.
Dividends
On the other hand, dividends are payments made to shareholders out of the company’s total revenue. Dividends are paid quarterly.
For example, if you had bought a share of Apple ($APPL) on the first trading day of the year at $133.52, your investment would have appreciated by $12.92 plus the occasional dividend payment that happened on February 5, May 7, and recently August 6.
Trove allows you to start from where you are to build financial freedom. You can select from a basket of over 4,000 stocks with as little as $10 or N1,000. The best time to plant your financial tree was 20 years ago; the next best time is NOW.
