Common Stock Lesson

There are two types of stock; common stock and preferred stock. Common stock caries voting rights and simply allows the investor to buy a portion of a company. The owner of common shares gets one vote for every share they own. Publically traded companies are required to have shareholder meetings every quarter. At these meetings share holders are allowed to vote on the changes that the board of directors are recommending. Basically stock share holders get to decide the most important company decisions.

Preferred share holders don’t get voting rights but they get preferential treatment when it comes to dividend payments. In other words preferred share holders get paid dividends before common stock share holders. You can also purchase convertible preferred shares which can be converted to common shares.

Different companies can attach different rules to their common stock. It’s possible that a company may issue common stock shares that don’t have voting rights. This can be helpful for private companies because if you want to transfer ownership of your business to your heirs but maintain control of the business while you are alive this will allow you to issue shares to them without voting rights. You would put the voting shares in your will or a trust which will past to your heirs upon your death. This will be helpful with your estate planning.

Beginner Investing 101
Not everyone is sure how to invest these days. By learning new strategies through beginner investing you can learn the basics of the different types of investments and how they work.

Estate Planning Lesson
In this lesson I walk you through the steps you need to take to make sure you have done everything possible to take care of your family upon your death. We teach you how to legally avoid unnecessary taxes on your estate and make sure the people you want to have your assets actually get the assets..

Another type of investment involving common stocks is called equity options. An option gives the holder the right not the obligation to purchase a companies share at a set price by a predetermined time. Some companies issue options to their executives as a part of their earnings to encourage them to work hard to increase the company’s share price. Incentive options are issued to help retain employee’s long term. Typically the options have to be held for ten years before they can be exercised.

Stock Option Books
I have selected a list of books from Amazon.com on options to help you get a better understanding of how options work. Options can be very risky if you don't understand what you are doing. It is very easy to loose all of your investment because when an option expires it becomes worthless.

There are various ways to purchase stocks but the most common method is to use a broker. There are full service brokers, discount brokers and internet brokers. The full service broker will do research for you, make recommendations and actually execute the trade on your behalf. Of course you pay the most in brokerage fees with this type of broker. I personally don’t use full service brokers because I read and try to stay on top of what’s happening in the market. In my opinion full service brokers don’t have any inside information because it would be illegal for them to share it so they are simply getting information from their research department and following a strategy. I feel I can do this myself. Discount brokers will help you make a trade and allow you to talk to a person. Discount brokers usually charge less for executing this type of transaction. Internet brokers usually give you access to research tools online but don’t let you talk to a person unless you need technical support. Internet brokers are my favorite because I can make my decisions and put in my trades in the privacy of my home.

My favorite online broker is optionsXpress because I can purchase common stock and options at a discount.
I like Optionsxpress because I can do all of my investment online, the brokerage fees are reasonable and they provide research tools.

You can also invest in stocks through a dividend reinvestment plan. This type of plan usually buys stock directly from the company and you authorize them to reinvest your dividend back into the company by buying additional shares. Share builder is a great company to help you do this.

Share bBuilder
ShareBuilder is a great place to invest if you have a few stocks that you like and feel are good solid companies that pay dividends. ShareBuilder reinvests the dividends in the company so over time you end up purchasing more shares with the earnings from the original shares you purchased.