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What is a stockholder, and how can I become one?

What is a stockholder and how can I become one

If you are interested in investing in the stock market, you have probably wonder what is a stockholder and what kind of shares could you hold.

Surely at some point in your life you have heard phrases like “corporate stocks have plummeted” or “urge to sell all titles”. Maybe you know that they come mostly from people who have a share in the stock market, from shareholders, also called stockholders.

But do you know what a shareholder is?

What is a stockholder?

To begin we will explain that an ordinary stock: it is a title that represents a part of the property of a company. Therefore, being a shareholder implies owning a fraction of the company that issued that title, which offers different rights and benefits.

Maybe you ask yourself at this moment: if, for example, I buy Facebook shares I own? If this signature created by Mark Zuckerberg makes money, I do too? Do I have access to products and services of the firm before the others for being part of the organization?

The answer is no. It is not that easy. Although, when buying shares, you own a part of the company, you must ask what type you bought and how many you have. That is, how much represents your share of the total shares that are in the market of that company.

Types of shares

There are different types of actions, and each type defines what benefits you have over the organization, the dividends earned from the purchase of that title (the profit distributed by the organization to its shareholders) and the level of influence you have on the company.

Let’s talk about common shares or class A. These represent the ownership of a portion of the company, and generally have a right over the dividends generated. In this type, usually investors have one vote per share to participate in certain decisions of the company.

Others are preferred shares, or class B, which represent some degree of ownership over the company, but usually the same voting and participation rights are not obtained as in common shares. Normally dividends are fixed in this type of shares, unlike the common ones where they are regularly variable.

Finally, we have class C or others. Companies can issue securities with different policies on the participation of investors in the decisions of the company. For example, a class A can have a weight of five votes per share, while in a class C of the same company, may have no voting power.

So, what does it mean to have one action or thousands? All publicly traded companies ‒i.e. whose shares can be sold and bought in the world’s stock market‒ have a total number of papers, each of which has a market price.

Multiplying the total number of shares of a company by the price per title, gives the total value of the firm. This means that an investor can have ten thousand shares, but if the total value of the organization is represented by one million shares, the investor in question will only own one percent of the company.

Naturally, the greater the share of an investor in a company, the greater its power in decisions and its dividend income.

Now you know that you are a shareholder, you can decide which is the best company in which you should invest, always analyzing their future viability to add revenue to your resources.

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