Dear Investor, Know in advance what a stock is and how it works

Hello Investors, Know in advance what a stock is and how it works

Stocks are one of the investment options in the capital market. Maybe it's still a layman, what is a stock? The impression is that this investment product is a toy for people with money. Meanwhile, anyone can invest as long as they know the ins and outs.

Indeed, there are still many who are confused about the interpretation and its types. Moreover, you can buy shares through life insurance with hyperlinked units, you know!

At first glance, it is known that stocks are a facility to get multiple profits and the opposite is a big loss.

In this discussion, the interpretation and working method will be discussed in a complete and simple manner. Follow the reviews below.

What are Stocks?

For the Indonesia Impact Exchange (IDX), shares are a feature of equity participation in an industry or limited liability company. Because you participate in investing so you have a claim on industrial income, claims on industrial heritage, and has the right to appear in the Universal Meeting of Shareholders (GMS).

In simple language, shares are a kind of fact of ownership of an industry/business entity. So, if you have this instrument, you are part of the owner of the industry.

Although stock investment is a good strategy for maximizing finances, it's a good idea to set aside some funds for the best health insurance too!

This is why it is often said as a valuable message. Yes, because it is a legal fact of ownership of an industry.

Dear Investor, Know in advance what a stock is and how it works

What is Stock based on its type

Stocks are divided into 2 types, namely common stock (not unusual stock) and preferred stock (preferred inventory). To be clear, here's the review!

What is Common Stock?

Common stock is a valuable message that acts as a fact of ownership of an industry.

The owner of this not unusual stock has the right to receive a portion of the income (dividend) from the industry and is willing to bear the risk of loss experienced by the industry.

Those who own the industrial commonplace inventory have the right to take part in the management of the industry. The amount of this allotment of management rights depends on the amount owned.

When the industry is profitable, then those who have a large percentage will receive a large profit share. On the other hand, they are also prepared to suffer losses if the industry fails to generate income.

Common inventory has several types, such as class A, class B, class C, and others.

Each class with its own advantages and disadvantages and the letter symbols do not have any meaning.

Generally, commonplace stock only has one type, but in some cases there are more than one, depending on industry needs.

What is Preferred Stock?

What is preferred stock? Preferred inventory is a valuable message that convinces its owner to have more rights than common stockholders.

The holder of this favored stock has the right to take precedence in the distribution of industrial profits (dividends). Continue to be the first in terms of paying back the paid-in capital if the industry is liquidated.

Finally, he has the right to change with the commonplace inventory.

Impressed desired stock is better than common stock. While that is not the case. Preferred stock is not better, it's just different from common stock.

In reality, the best way to view this product is to liberate the right to own the industry in order to get protection like a creditor.

Preferred stock is generally referred to as a combination stock because it has almost the same identity as common stock.

Stock Profit

After recognizing the meaning, then what are the advantages of stocks? Basically, stock profits are dividends and capital advantages. Here's the explanation!

1. Dividend

What is Dividend? Dividends are profit sharing provided by the industry and derived from the profits generated by the industry.

Dividends are given after obtaining approval from the shareholders at the GMS.

If you want to get dividends, then investors are required to hold this valuable message for a relatively long period of time, namely until the ownership is located within a period in which they are recognized as shareholders who are entitled to receive dividends.

Dividends distributed by the industry can be in the form of cash dividends.

This means that each holder is given a dividend in the form of cash in a certain amount of rupiah for each share.

Or it could be in the form of a dividend, which means that each holder is given a dividend of several shares so that the amount owned by an investor will increase with the distribution of the dividend.

2. Capital advantage

Capital benefit is the difference between the purchase price and the selling price. Capital benefits are created by stock trading activities in the secondary market.

For example, an investor buys ABC inventory at a price per share of Rp. 3. 000 after that sell it at a price of Rp3. 500 in line with shares, which means the investor gets a capital gain of IDR 500 for each inventory he sells.

Stock Risk

As an investment instrument, of course, stocks also have risks. Stock investment is what investors need to watch out for and suspect, namely capital loss and liquidation risk.

1. Capital loss

This is the opposite of capital benefit, which is a situation where investors sell stock for less than the purchase price.

For example, the inventory of PT. XYZ purchased at a price of Rp.2. 000 per share, after that the share price continues to face depreciation until it reaches Rp1. 400 in keeping with shares.

For fear that the stock price will continue to fall, investors sell at a price of Rp. 1. 400 so that they face a loss of Rp. 600 in step with shares.

2. Liquidation risk

The industry whose shares are owned is declared bankrupt by the legal assembly, or the industry is dissolved.

In this case the claim rights of the message holder have the last priority after all industry obligations can be paid (from the sale of industrial assets).

If there is still any remaining from the sale of the industrial wealth, until the remainder is divided equally to all holders of valuable messages

However, if there is no residual industrial wealth, then the holder will not get the proceeds from the liquidation.

This situation is the heaviest risk of the holder of the investment instrument. For this reason, someone who holds this valuable message is required to continuously explore the growth of the industry.

In the secondary market or in daily trading activities, prices face fluctuations in the form of increasing or decreasing.

The cost is created because there is demand and supply.

The supply and call for are formed because there are many factors, both specific to the stock (performance of the industry and the industry in which the industry operates) or macro aspects such as interest rates, inflation, exchange rates and non-economic factors such as conditions. social and political, as well as other aspects.