Articles

Three Indians Pattern: Disassembling The 3-Touch Strategy

by Kazi Tanzib Forex Trading Analyst
Achieving financial success today is inconceivable without basic knowledge of fundamental investing principles. One can hardly employ investment strategies if they haven’t dived into researching such significant securities as stocks, also known as equities or shares. The stock market has been operating for centuries and is characterized by high volatility, which contributes to more significant income.

Stocks are broken down into multiple categories and classifications. For an aspiring investor, it’s crucial to distinguish between the different types of stocks available on the market. This article outlines the most popular varieties of equities that are always in high demand.

Common Stocks vs. Preferred Stocks

A stock is a security that represents an investment in a company. A company has the right to sell the units of its stocks, called “shares,” which are generally issued as either common or preferred stocks.

Common Stocks

Сommon stock is widely considered the most popular stock to invest in, hence the name. It embodies the proof of partial ownership in a company. If the company dissolves in the future, the respective shareholders have the right to get a proportional share of the remaining assets’ value. However, they will always be at the end of the line and will receive the remaining shares (if there will be any left) of the asset only when the holders of bonds and preferred stocks get theirs.

Theoretically, common stocks provide their owners with unlimited upside potential. However, there is a genuine risk of losing the invested money - in the event that the company ceases to exist without any valuable assets left.

Preferred Stocks

Preferred stock is a hybrid security that adopts common characteristics of both bonds and stocks. Even though the holders of preferred stocks don't own any shares, they receive fixed dividends. The rate of dividend on preferred stocks is either a percentage of the nominal value of shares or an absolute number; it never depends on the company’s revenue. To some extent, preferred stocks are similar to the fixed-income market, and this fact also makes them sensitive to changes in interest rates. That’s why this type of stock is attractive to investors only when the interest rates are stable or about to decrease.

Holders of preferred stocks obtain the pre-emptive right to claim ownership of the asset's part upon liquidation of the company. These privileges don't come for free, as investors have to sacrifice their voting rights and are not eligible to participate in the company's management.

Preferred stock provides its holder with the right to get back a certain sum of money upon the company’s demise. Preferred shareholders are also the first to receive dividend payments; therefore, they are given an edge over common shareholders. Companies typically offer only regular common stocks.

Well, you have to try harder to get good results. That's why I will suggest a proper trading plan.

Thanks!

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About Kazi Tanzib Advanced     Forex Trading Analyst

70 connections, 4 recommendations, 292 honor points.
Joined APSense since, January 18th, 2021, From khulna, Bangladesh.

Created on Dec 2nd 2021 05:35. Viewed 108 times.

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