Mutual Funds

Stocks are financial instruments of equity investing issued by corporations and distributed to financial institutions and private investors. As a shareholder, you are entitled to a part of the firm's assets and earnings. The level of partial ownership is determined by the number of stocks owned relative to the number of shares outstanding. For instance, if a corporation has 20,000 shares outstanding and you own 1,000 shares, you are entitled and have a claim to 5% of the company's assets.

  • Stock classification
    • Stocks are mainly classified into common and preferred. Common stocks allow shareholders to exercise control over the company by having the right to vote for the board of directors and corporate policy. Moreover, common stockholders are entitled to receive dividends, but after preferred shareholders are paid in full. Preferred stocks do not offer voting rights, but reward shareholders with a higher stake on assets and earnings. Moreover, preferred shareholders have priority in dividend payments as well as in case the company goes bankrupt or is liquidated.

      Stocks are also classified into other types, including:

      - Growth stocks: usually issued by fairly low-cost corporations whose value can increase in the long-term and have a fair growth potential.
      - Income stocks: low growth potential but consistently pay high dividends.
      - International stocks: issued by foreign companies and traded on U.S. exchanges.
      - Cyclical stocks: related to the variations of the economic environment.
  • How to evaluate stocks
    • Factors that should be taken into account when evaluating a stock's performance are:

      Stock price: the price that the stock is trading.

      Market capitalisation: the total market value of the company based on its shares outstanding.

      Trading volume: the amount of share transactions. The higher the trading volume, the higher the liquidity of the stock.

      52-Week Range: the 52-week range of a stock shows a stock's highs and lows over the past 12 months, including year-to-date change, thus providing an idea of a stock's overall performance.

      Price to earnings (P/E) ratio: P/E measures a stock's current price relative to per share earnings and it is used to compare a company to similar companies.

      Dividend yield: dividend yield measures how much money investors get for each dollar invested in the company.

      The beta coefficient (b): it measures a stock's volatility relative to the market's risk. High beta stocks have a beta greater than 1.0 and are high risk. Low beta stocks have a beta lower than 1.0 and are low risk. Stocks with a beta equal to 1.0 are considered as volatile as the market.
  • How to invest in stocks
    • To properly invest in stocks you first need to understand how they function. Companies are evaluated based on their market capitalisation. This means that when a company is profitable, the value of its shares outstanding increases and therefore, your claim as shareholder on assets and earnings increases as well. Yet, it is of high importance to set investment goals, which means to undertake the investment risk that suits your investor profile. Are you a risk-taker investor? You should invest in aggressive stocks. Are you risk-adverse? You should build a conservative portfolio that produces average returns in the long-term.
  • Trading Stocks Online?
    • Part of a comprehensive investment strategy is to understand the latest trends and use them to make the most of your trading experience. Here are some reasons why you should use online stock trading as a part of your investment strategy:

      Real time quotes - By trading online, you can have efficient and quick access to real time information 24/7, all year round. You are free to decide what stocks you want to buy or sell and when and you can do any trade right away. You have access to free stock quotes and can research the performance of stocks that match your investment profile.

      Access to research tools - Online stock trading allows you to have unlimited access to research tools mostly because you can trade 24/7, 365 days a year. You can test new stock exchange listings and stock performances by using various research tools that are typically available from financial websites for free.

      No intermediaries - With online trading, you are responsible for your trades and you can save time and money by avoiding the intermediaries. You can have access to your account 24/7 and decide on your trading activity by assessing the global markets and instantly capitalising on investment opportunities.

      Better control - By trading stocks online you have the absolute control over your portfolio and are responsible for your investment decision making. You are not obliged to take your broker's approval, neither waiting for their input to complete a trade.

      Lower commissions - Online stock trading has lower commissions than traditional trading through a broker. Besides, the more people are attracted to online stock trading, commissions are brought down.