tailieunhanh - Stock Market and the Understanding Stocks

A pyramid scheme involves the collection of money from new investors to pay earlier investors. Despite the appearance of a legitimate multi-level marketing program with legitimate products or services to sell, along with the promise of high returns on a short-term investment, these schemes eventually collapse. At some point, it becomes impossible to collect enough money from new investors, and many investors lose all of their money. 2 A Ponzi scheme is a type of pyramid scheme named after Charles Ponzi, who scammed New England residents in the 1920s with the promise of a 40% return in just 90. | FE-605 Debra Pankow Family Economics Specialist Understanding Stocks and the Stock Market Stock Classification Stock is ownership in a company with each share of stock representing a tiny piece of ownership. The more shares you own the more of the company you own and the more dividends you earn when the company makes a profit. In the financial world ownership is called equity. Stocks are in two primary classes. The one you choose depends on what you want from a stock. Preferred stock typically pays regular dividends and investors who want income foremost from their stocks favor it. Common stock represents ownership of a company and may offer more rights and privileges than preferred stock. NDSU Extension Service North Dakota State University Fargo North Dakota 58105 MARCH 2005 Issuing Stock Businesses issue stock to raise money. They use this money to finance expansions pay for equipment and fund projects etc. Corporations issue stock when they may need additional capital to operate successfully. The fancy term for issuing stock to raise money is equity financing. The money received from investors who buy stocks is called equity capital. In the world of securities the word equity usually refers to stocks. The other method of raising money is debt financing which involves selling bonds. When companies make profits they may reward their stockholders with pieces of their profits known as dividends. Dividends are an incentive for investors to hold stocks. Now that you know the why of buying stocks you will need to know the where. The Stock Market and Stock Exchanges Investors may purchase stock on the primary or secondary market. A company sells its stock to the public on the primary market through its initial public offering. The primary market is the market in which investors have the first opportunity to buy a newly issued security. Investors may sell their shares through brokers to other investors on the secondary market. The secondary market can be structured as .