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Author Topic: when investing in stocks, why does it really matter that you own a part of that company?  (Read 37 times)
Isaac_Vulcger
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« on: July 26, 2011, 05:02:35 AM »

I know that the primary reason for trading stocks is to make money off of selling the stocks for more money than you bought it for. I  also hear people that an advantage of buying stock is that you have part ownership of a company. Why does that matter at all, other than it just being cool that you own part of a company
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Rob_Bryant
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« Reply #1 on: July 26, 2011, 09:36:10 PM »

Because if the company suddenly goes up exponentially in value then your shares would be worth a lot more.
Also, if you own part of the company, and you are a tycoon for instance then you could consider gradually adding to your shares and eventually buying out the whole company.
Also also, if someone wanted to buy out the whole company, then they would have to also buy your share off of you, which again you stand to make a lot of money on as you could get over the odds for it.
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drmark27
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« Reply #2 on: July 26, 2011, 10:23:39 PM »

It absolutely doesn't.  It may seem cool to the beginning investor but if you're looking to make consistent profits from the market over time as a professional trader then all the tickers run together and a chart is a chart and it simply has nothing to do with whether you will succeed.
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John_W
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« Reply #3 on: July 26, 2011, 11:11:09 PM »

As a small investor investing in large companies, the voting rights of stocks are of little consequence and many companies will have share categories for that, for example Berkshire-B shares have 1/200th the voting rights of Berkshire-A stocks but because a Berkshire-A share can be converted into 30 Berkshire-B shares, Berkshire-B typically trades at 1/30th the price of Berkshire-A.   Hence there are shares that cater to investing for profit rather than for control but keep in mind that some of the price movements is for control as during a corporate takeover, therefore though the voting rights are of little consequence to you, you will still want them because someone else may pay a premium for your shares just for those voting rights.

If you really don't want the voting rights or dividend rights but still want to benefit from the price changes in the underlying stock, you can buy a call option and sell a put option creating what's called a synthetic share purchase but at a fraction of the price of a share.   This is particularly useful with growth stocks as the return is entirely from the stock pricing with companies that do not pay dividends.   You should always reserve enough funds or margin to exercise the options but the same sum of money reserved to exercise can serve to exercise more than one option so long as the options are expiring on different days which means that if your investing strategy is based on a fixed time to hold the investments (many are such as Joel Greenblatt's strategy in his book "The Little Book That Beats The Market") then you can use synthetic purchases to benefit from several times more stock than you can afford to purchase.
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jeff410
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« Reply #4 on: July 26, 2011, 11:15:53 PM »

For the same reason you buy any other asset, such as a house.  Because you have equity in the company, and you are entitled to a share of the dividends if they pay it.  You have a claim on the earnings and the assets of the company in liquidation.  Although as a common shareholder you're last in line on the claim.  And you get a vote on major issues.
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Mike_Cichocki
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« Reply #5 on: July 26, 2011, 11:20:40 PM »

As a retail trader "owning" shares in a company means nothing. In fact retail holdings are so minuscule that even all totaled we still have no say in the companies direction or future. Price movement is what pays you as a trader or investor. Don't worry about WHY the price is moving because bias doesn't pay you and you can't control the price. Dividends are basically profit sharing and that's the one true benefit of "owning" shares of a blue chip or big company IMO.
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Jason_Bone
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« Reply #6 on: July 28, 2011, 10:59:10 PM »

The leading companies have their websites where you acquire correct information and news about the stock prices and its rise and fall. So, first choose a reputed company which will help you and guide you in online stock market. Internet helps you to purchase stocks.
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