Stocks
Stocks symbolize ownership interests in a corporation, granting investors a slice of the company's assets and profits. Companies issue stocks mainly to gather capital for funding operational activities, offering two primary types: common and preferred stocks.
Types of Stocks
Common stocks provide voting rights on corporate governance, though holders are last to claim on assets in liquidation. Preferred stocks lack voting rights but have precedence over common stocks in earnings and asset claims during company liquidation.
Trading Venues: Lit Pools and Dark Pools
Stock transactions occur in both 'lit pools,' with visible order books for all market participants, and 'dark pools,' private markets without public order visibility, catering to institutional investors. Lit pools offer transparency in liquidity and price movement predictions, whereas dark pools maintain secrecy around trading intentions.
Market Forces: Supply and Demand
Stock prices are governed by market supply and demand, with factors like company performance, economic conditions, and global events influencing price dynamics.
Earning Potential and Risks
Investors can profit through dividends or capital gains but face risks such as potential depreciation or total loss in value, particularly if the company faces bankruptcy.