Investing in stocks is a very old investment scheme where the investor has been putting their funds into and earning huge returns. The word stock means a business entity representing the original capital invested or paid by the founders of business. So investing in stocks means to purchase the capital of the company. This It is a kind of security for the creditor in the business as these funds cannot be withdrawn.
The stock is a distinct or fixed form of property however the assets in the business fluctuate in value and quantity. The investing in stock in the business is a very important thing as it is the capital without which the business cannot run. The stock commonly known as capital stock is further divided into shares where the total number of shares should be stated when the business is formed. So the number of shares are actually the division of the capital amount into smaller units. Each share has a value which is determined by the division of capital into equal units. Each share has a price value which is also called in the market as the par value. Par value is the minimum amount of value the business can issue and sell. The price at which the shares are being sold which includes the application money, allotment money, call money, share premium, calls in arrears, calls in advance and the amount of the forfeiture of shares. So the value of each share is calculated and then represented as the capital amount and shown in the accounting of the company. The capital amount appears on the liability side of the balance sheet.
Investing in stocks has gained huge popularity in the recent past where the investors have been investing in stocks of companies and taking the risk of earning returns in a small span of time.
The people should have deep knowledge about the market in which they are investing into and should know about the company also. The people who purchase shares of companies receive a document stating their ownership of that part of the company’s capital known as the stock certificate. The stocks sold in the market of a company are sold in several forms like the equity shares, preference shares, bearer shares and registered shares. These shares are further divided into several heads according to the investments like the cumulative preference shares, non- cumulative preference shares, redeemable preference shares, participating or non- participating preference shares and many more.
Each type of share gives a certain right to the shareholder which makes the differentiation in the prices also. When a person is investing in stocks of a company the investor should know the authorized or the registered capital of the company, the issued capital, subscribed capital, called up capital and the paid up capital of the company which will give the investor a small description of the company’s standing in the market according to its capital.
The investing in stocks of companies have grown a lot in the late nineteenth century, businesses and entrepreneurial ventures are all in. People have gained knowledge about the market and have understood the factors influencing the prices of the commodities. Earlier people used to think that investment is just luck and nothing else but now people have understood the forces prevailing in the market affecting the price of the commodities. Today people can easily forecast the price of the investments depending on the present position of the market and by deciding the forces which may affect the price of the commodities in future. Thus investing in stocks is a very widely known profit earning market in a very small period of time.