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What Is Common Stock?

Common stock is the most common type of stock. When you hear conversation about stock, this is usually the type of stock being talked about. Common stock is considered the riskiest of investments; riskier than preferred stock.

What Is Preferred Stock?

This stock is similar to common stock in that it is considered as ownership in a company but doesn't usually come with the same voting rights. The major difference between preferred and common stock is that common stock's returns are variable whereas preferred stock has a guaranteed fixed dividend. Preferred shareholders will receive payment before common shareholders in the event of liquidation and the stock is also callable, which means it can be repurchased by the company at any time for any reason.

There Is a Letter on My Stock Certificate. What Does it Mean?

Most companies will divide their stock into different classes. They will do this in order to keep the voting rights isolated to a particular group. The different classes are designated by the different letters.

What Causes the Price of Stock to Change?

It's simple economics - supply and demand. The more stock that is purchased, the more the price goes up. Likewise, the less the stock is purchased, the more the price drops. The demand for a particular stock is generally affected by what investors feel the company is worth.

What Determines a Company's Value?

A company's value is determined by multiplying the price of a share by the number of shares outstanding or the amount of investor-owned shares. Profit is usually the most important factor affecting a company's value. However, there are several other factors that affect the company's value, including the investors' sentiments, attitudes, and expectations. Obviously, these other factors can be difficult to measure.

Do I Need a Lawyer Experienced in Investments?

Consultation with an attorney for most investment decisions is probably unnecessary. However, if there is a dispute with your broker, such as when you lose a significant part of your investment based on the broker's bad advice, you should speak to a lawyer immediately. An experienced investments lawyer will help to explain your rights as well as preserve any possible remedies you may have.

Photo of page author Ken LaMance

, LegalMatch Law Library Managing Editor and Attorney at Law

Last Modified: 02-05-2014 11:01 AM PST

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