Common stock is a security that represents ownership in a corporation. Holders of common stock elect the board of directors and vote on corporate policies. This form of equity ownership typically yields higher rates of return long term. However, in the event of liquidation, common shareholders have rights to a company's assets only after bondholders, preferred shareholders, and other debt holders are paid in full. Common stock is reported in the stockholder's equity section of a company's balance sheet.With common stock, if a company goes bankrupt, the common stockholders do not receive their money until the creditors, bondholders, and preferred shareholders have received their respective share. This makes common stock riskier than debt or preferred shares. The upside to common shares is they usually outperform bonds and preferred shares in the long run. Many companies issue all three types of securities. For example, Wells Fargo & Company has several bonds available on the secondary market. The first-ever common stock was established in 1602 by the Dutch East India Company and introduced on the Amsterdam Stock Exchange. Larger US-based stocks are traded on a public exchange, such as the New York Stock Exchange (NYSE) or NASDAQ. As of 2019, the former has 2800 stocks listed on its bourses, while the latter has 3300 stocks listed. NYSE had a market capitalization of $28.5 trillion in June 2018, making it the biggest stock exchange in the world by market cap.Become a supporter of this podcast: https://www.spreaker.com/podcast/investment-terms--4432332/support.

Ver todos los episodios