Investing in stocks
We have seen in a previous post that there were only three asset types available for non-institutional investors (Once you have ignored the types of investments that require huge initial investments or technical skills way above what an individual can do). These three types of investments are stocks, properties-related investments and savings.
Each of these types of investments have sub-categories. For instance, properties investments can fall in residential investments, commercial investments, industrial, retail etc..
But what do we mean by investing in stocks after all?
When we talk about investing in stocks, we talk about investing in common stocks. There are indeed different types of stocks: common stocks and preferred stocks and there is also different classes of stocks: you have to understand that a company has the possibility to customise different classes of stock in the way they wish to. So in reality, there is a lot of different choices (one could even say infinite choice) to select from when you invest.
When you buy a common stock, you buy a part of the company. You now own a part of it, and you are entitled to share the profits generated by the company. That sounds great but a company may not make profits all the time, losses are a reality and sometimes companies do even go bankrupt. In the latter scenario, shareholders lose all the money that have invested in the bankrupted company’s stocks.
Investing in stocks as such is not difficult. What is difficult or even extremely difficult is to invest in stocks and constantly make profits.