Financial markets offer their participants the largest
favorable conditions for the purchase / sale of
instruments that they have inside. Its main functions are:
guaranteeing liquidity, forming asset prices within
establishment of proposal and demand and decrease of
operating expenses incurred by participants of
The market.
The financial market included a variety of instruments, hence its
The operation depends entirely on the instruments you have. In general
can be classified according to the type of financing
instruments and in accordance with the terms of the instruments’
paying.
From the point of view of different types of instruments held the
the market can be divided into that of promissory notes and
the one of values (bag). The first contains
promising instruments with the right for their owners to obtain
a fixed amount of money in the future and is called the
promissory note market, while the latter links the
issuer to pay a certain amount of money according to the
return received after settling all promissory notes
and it’s called the stock market. There are also types of
values that refer to both categories, such as
converted preferred stocks and bonds. They are also called
instruments with fixed return.
Another classification is due to the settlement terms of
instruments. These are: asset market with high liquidity
(money market) and capital market. The first refers
to the market for short-term notes with assets
age up to 12 months. The second refers to the market for
long-term notes with instruments that are older than age
12 months. This classification can refer to the bonus
market just because your instruments have a fixed expiration date,
while the stock market does not.
Now we turn to the stock market.
As mentioned earlier, common stock buyers
they normally invest their funds in the issuing company and
become their owners. Its weight in the production process
decisions in the company depend on the number of shares
he / she owns. Due to the financial experience of the
company, its market share and potential future actions
can be divided into several groups.
1. Blue chips
Large company stocks with a long history of earnings
growth, annual return over $ 4 billion, large cap
and the constancy in the payment of dividends is known as
blue chips.
2. Growth actions
The shares of said company grow faster; your managers typically
follow the policy of reinvestment of income in more
development and modernization of the company. Thesis
companies rarely pay dividends and if they do
dividends are minimal compared to other companies.
3. Stocks of income
Income stocks are the stocks of companies with high and
stable earnings that pay high dividends to shareholders.
The stocks of these companies often use mutual funds in the
plans for middle-aged and elderly people.
4. Defensive actions
These are the stocks whose prices are stable when the
market downturns, do well during recessions, and are capable of
minimize risks. They work perfectly when the market changes
sour and are in requisition during the economic boom.
These categories are widely distributed in mutual funds, so for
better understand the investment process it is useful to maintain
take into account this division.
The shares can be issued both within the country and abroad. On
In case a company wants to issue its shares abroad, it can use
US Depository Receipts (ADR). ADRs are generally issued
by US banks and point out the right of shareholders to
own the shares of a foreign company under the asset
management of a bank. Each ADR designates one or more shares.
possession.
When trading stocks, apart from the buy / sell relationship
profits, you can also receive quarterly dividends. Them
depend on: type of action, financial status of the company,
share category, etc.
Ordinary shares do not guarantee the payment of dividends.
The dividends of a company depend on its profitability and surplus
cash. Dividends differ from each other as they must be
paid in a different time period, with the possibility of
being both higher and lower. There are periods when
companies do not pay dividends at all, especially when a company
is in financial difficulty or in case the executives decide
reinvest the income in the development of the business. Weather
calculating the acceptable price of shares, dividends are the key
factor.
The price of the common share is determined by three main factors:
annual dividend rate, dividend growth rate and discount
omitted. The latter is also called the required income rate. Tea
The company with a high level of risk is expected to have high
Required income rate. The higher the cash flow, the higher the stake
prices and versus. This interdependence determines the assets
value. Next, we will touch on the division of stock prices.
estimating in three possible cases with respect to dividends.
When buying stocks, aside from risks and dividends
analysis, it is absolutely important to examine the company
carefully regarding your profit / loss accounting, balance, cash
flows, distribution of profits among its shareholders,
manager and executive salaries, etc. Only when you are sure
of all the ins and outs of a business, you can buy or
Sell shares. If you are not sure about the information,
It is more advisable not to have shares for a long time.
(especially before the publication of financial accounting).