Stock is the entire shares in which ownership of a company is divided. In ordinary language, the stocks are collectively referred to as “stock.” A single share of stock represents a fractional share in percentage to the total number of outstanding shares. As compared to financial assets, tangible assets are safer and can retain their value for a longer period. On the other hand, an intangible asset like the stock is not so secure and even if it becomes less financially secure, it is difficult to sell it.
There are two types of stock markets – common stock markets and preferred stock markets. The most popular market in the United States is the New York Stock Exchange or NYSE. On the other hand, there is also the Nasdaq market in New York, which trades over the counter for securities not available in the Nasdaq. Over the counter stock trading is more widely known as electronic stock trading.
It is a common misconception that a shareholder is a person who has direct control or ownership of a particular business, entity or individual. He or she is a representative of that business. A shareholder is not a lender or secured party with whom a borrower attaches his obligation to provide money. A shareholder is a promoter who makes a loan to an entity by way of common stock. The obligation of a shareholder is to buy a minimum number of shares at a stated price and deliver to the seller a number of such shares at the stated price on or before a specified date. For the investor, it is a matter of risk, as his investment is converted into shares of stock of that company.
The Nasdaq stock exchange is a virtual stock market, free from government regulation and operates electronically. Over the counter stock trading involves short sales, where a contract is entered into whereby a seller offers one or more preferred stock (under a master agreement) at a definite price on or prior to a specific date. A counter offer is also made by a seller to purchase a specified amount of common stock at a definite price and date. In electronic trading, there are no brokers or sellers to charge fees.
A preferred stock is one that is owned by the purchaser and is usually subject to a secondary marketability, meaning that it can be sold in the same transaction as other common stock. This secondary marketability ensures that a secondary market exists for the preferred stock and prevents its price from falling below the price at which it was bought. Although secondary markets exist for many kinds of equity securities, the Nasdaq works primarily with American Depositary Receipts or DERs. Over the counter stock trading is conducted electronically through the Internet and involves companies that are registered on the Nasdaq.
There is a lot more to understand about stock definition and how it affects the way you conduct your business before you can begin. To begin, you need to understand the difference between common stock and preferred stock. Then you need to decide what kind of common stock you are interested in buying, and which kind of preferred stock that you would like to purchase. You should then determine what date and price you will buy and sell these stocks at. Knowing this basic information will help you determine if it is the right time for you to buy and sell shares on the Nasdaq.
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