stock definition

stock definition

A stock is defined as a financial security that expresses the right of ownership of an individual over a small part of the company, as this share allows its owner to benefit from the assets and profits of the company according to the value of the shares. .  During the exchange, certain government security measures are taken to protect the investors from fraudulent acts.

    People who own shares in a company are called shareholders or partners, the shareholder has the right to take his share of the profits and can also claim his right to the capital if the company is sold.  Usually some words are used frequently in many financial transactions, such as: stocks, shares, stockholders' equity.

Factors affecting stock prices

Stock prices are affected by several factors; Such as the impact of the global economy on it, the company's business performance, policies imposed by governments, natural disasters, and others.  Investors' support for a company and their belief in its success often affects a company's share price; This leads to an increase in its price.

  Some financial information indicates the value of the market shares, and also gives an important indicator to buy shares or not, as there are many indicators and statistics that support this, including the following:

•    Increase in income: An increase in the rate of income contributes to an increase in the value of shares, as it indicates the degree of customer satisfaction with the services provided by companies. 
•   Increase in profits: The increase in profits expresses the level of effectiveness of the management in the company and its success in obtaining profits.

Factors affecting stock behavior

• Market capitalization: Market capitalization is defined as a standardized measure that indicates the amount of capital of companies; As large, medium, or small VCs for example, there are small companies valued at less than $2 billion, medium-sized companies with a value of between $2-10 billion, and large companies with a value greater than $10  The dollar is a large capital that is less likely to lose because of its huge financial reserves that help you recoup your losses very quickly.
•  Industry and its sector: companies are classified according to their industrial branch or the sector to which they belong, and the sector represents a large part of the economy; Such as industrial companies, service companies and financial companies.  Industries are described as being part of a sector, where economic factors often influence many industries; Your benefit to investors increases or decreases, and interest varies based on performance from period to period. 
•  Defensive and cyclical stocks: The list of defensive stocks and cyclical stocks includes defensive stocks and cyclical stocks, and they differ from each other in the way they earn profits.  Defensive stocks are often represented by the food and service industries; Because people need food and services at all times, and cyclical stocks are often related to the state of the economy; so that its market value thrives in a booming economy and declines in times of recession; Like travel and valuables. 
•  Growth and value: the effect of the growth factor is associated with stock prices in conjunction with the speed of growth and expansion of companies, regardless of the age of the company; where it depends on the vagaries of the times; Due to continuous technological progress and changing strategies, therefore, attention is directed towards companies that continue to grow and make profits, and the value factor provides a change in economic balances; High-value stocks reflect the longevity and economic strength of the industry.

How do stocks work?

Stocks are a way to support companies with funds to meet some of their needs; Like paying off some debt, endorsing a new product, or helping them grow their business. The initial stages of buying shares begin when the company offers what is called an initial public offering, which allows investors to buy or sell the company's shares in the financial markets. 

 Supply and demand control stock prices in the financial markets, as there is a positive relationship between them. The more shareholders demand to buy shares, the higher their price will be and vice versa. It should be noted that the basis for buying and selling shares depends on people's expectations of potential profits or losses of companies or reports issued by companies.  As the share price rises with the shareholders believing that the company will make a good return on their investment, allowing them to make a profit by selling their shares at a higher price than the previous purchase price.  from the previous purchase price.

• Capital Gains: Earning profits from buying and selling shares.
•     Dividend distribution to shareholders: It is a quarterly payment of the profits obtained by the company, which are distributed to the shareholders according to the number of their shares in the company.  In order to motivate them to continue investing in the company.
•     Dividends: This is the riskiest division of dividends. These contracts derive their value from the value of the underlying assets; Like stocks and bonds, it allows an investor to buy and sell shares at a specific price at a specific time.  The investor benefits from the contract when the stock price rises; You can make money by buying shares at their previous price and selling them at the current higher price.