When the company makes money, you also get some part of it
is the benefit of owning stock. For example, through your research, you learn
that one company is building new theme parks in Hong Kong,
Japan, and Anaheim.
They also launched go.com on the Internet and one show they telecast is the
most popular show on network television. With this information, in hopes that the company will
announce good earnings and that the stock price will go up in the future, you
decide to buy 100 shares of that company's stock.
You will be rewarded with a higher share price of the stock
as a shareholder meaning that you made money. Not only millionaires but also
kids, schoolteachers, policemen, housewives, and almost every one can also buy
shares of a corporation.
Alternatively, possession of stock is also having its
disadvantages. You get a full share of the risk of an operating business when
you buy shares of a stock. It does not guarantee that you make money by owning
stock.
Irrespective of whether you make
or lose money with stocks, you still have voting power in the company. You are
allowed one vote per stock share that you own as a shareholder.
You must either
attend a corporation meeting or fill out a proxy ballot in order to vote, which
is just like an runaway ballot in an election. Another person casts your vote
for you with the proxy ballot.
Just like voting for Senators and
House Representatives to the Congress, the voting usually decides who will be
on the board of directors.
Matters such as the company budget, purchasing other
companies, issuing additional stock, and paying a dividend are overseen by the
board of directors. In general, the board oversees major decisions made by the company
executives.
Owning shares of a stock has its risk and reward. However,
you can see from the above examples that if you research a company before
buying it, stocks can be profitable. Stock prices may escalate or down on a
daily basis.
In the long run, if the company is making money, the share price
will go up because as a shareholder you share the profit of the company.
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