Sunday, February 22, 2009

Tips To A Newbie Investor In Stocks

By David Ross

One way to get your money moving is to invest it in stocks. This is a learned advice given by many financial experts. The reason for this is practical. When you deposit your money in a bank, it bears interests in a given period of time. However, the said interests would usually take some time to accumulate plus, it is given in not so impressive rates. On the other hand, investing your money in stocks would entitle you to dividends proportionate to the shares you've bought. Moreover, investing in stocks would entitle you to receive compensation income which is derived from your own work or profession and business income which can be derived from your investment in stocks.

Dividends are the rightful shares of the stockholders in the income of the corporation based on their proportionate investment therein. Aside from that, when you become a stockholder of a corporation, you become an automatic member of that corporation entitled to rights and obligation being as such provided that your name properly appears in the stock and transfer book.

In buying stocks, there are other forms of payment aside from cash which is considered as an acceptable consideration. In fact, a combination of the two or more of the valuable consideration provided below would suffice provided that the value properly answers to the amount of the stocks that you are buying:

1. Payment of cash which is the legal tender and acceptable to the corporation; 2. Property which could either be tangible or intangible provided it is received by the corporation and has fair valuation to that of the shares of stocks assigned to the stockholder. 3. Labor or services given to the benefit of the corporation. 4. A prior loan or credit obtained by the corporation. 5. The amount coming from the unrestrained earnings to the stated capital of the corporation; 6. Outstanding shares which was exchanged to stocks due to reclassification or conversion of the latter.

It is an elementary rule that before you invest in stocks, it is important that you should also know the different classification of stocks. The different classes of stocks represent different rights and obligation in the part of the stockholders. Hence, this will help you to maximize the protection provided by law, the articles of incorporation and by-laws of the corporation in dealing with your stocks.

Most of the regular readers here already know this. Of course, you won't be surprised to hear that there is still some room for improvement. I have found out that Options isn't that easy. They can only do it with Investools. What I have done here is take a pre-owned Bonds that explains what you can do with Nasdaq.

Par value or no par value: This pertains to stocks which have specific values fixed and their primary purpose is to fix the minimum subscription issue price of the shares, thus assuring creditors that the corporation would receive a minimum amount for its stock. The no par value on the other hand, pertains to those, which do not state how much money is represented on the face of stock certificate.

Common or preferred: Common share of stock refers to one, which entitles the holder thereof to a pro rata division of profits, if there are any. The preferred share is one, which entitles the holder thereof to certain preferences over the holders of a common stock. - 15224

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