Stocks - Invest in the Stock Market

Stocks

Stocks represent units of ownership in a company. They represent a claim on the company's assets and earnings. Stocks also usually carry voting rights which can be exercised for any corporate decisions. Throughout history, stock ownership has been an excellent way to build wealth.

Generally, there are two main types of stock. The majority of stock is issued in the form of common stock. Common stock typically carries voting rights, but in the event of liquidation common shareholders do not receive money until after creditors, bondholders, and preferred shareholders are paid. This type of stock usually has the potential for the greatest long term returns since it carries the most risk.

Preferred stock typically does not come with voting rights, but may provide a guaranteed fixed dividend payment. Compared to common stock, there is less potential for capital appreciation, but preferred shareholders have preference in the event of liquidation.

Stocks can be purchased from a stock broker. There are generally full service brokerage firms that offer advice and help manage your account or discount brokerage firms that offer little personal attention.

Dow Jones Industrial Average

The Dow Jones Industrial Average is one of the most widely followed stock market indices. It was created by Charles Dow in 1896. At the time it contained only 12 stocks, which were primarily industrial. Today, the index contains 30 stocks and are no longer limited to industrials. The stocks represent some of the largest and most widely held US stocks.