| Do you care to know the bottom line on common | | | | counted as a vote. Now 5 share holders are going to |
| stock? If you have a minute I will try to explain. | | | | be on the board of your company, so each share |
| Common stock is at the center of our securities | | | | gets a vote on those 5 empty spots. Even the |
| market. It is at the heart of our corporate capitalist | | | | beginner investor with his $10 share gets one vote |
| system. The word "common" comes from part | | | | on 5 spots. Guess who's most likely to get on that |
| ownership in the company by others. If you own | | | | board in your company? You guessed is it, Bill and |
| stock, you share a "common" stock with people that | | | | Ted. Excellent! In turn those 5 members will vote on |
| own stock in the company. Let me explain. Let's say | | | | a chairman in charge of managing your new leg |
| you have a great idea for a new line of leg warmers | | | | warming company. The board of directors will also |
| that are going to change leg warming as we know it. | | | | vote on other officers responsible to the company |
| The thing is you have no capital to totally invest in a | | | | who may or may not own shares in the company. |
| company to get it restarted. So you get all your | | | | They will all have to answer to the board of |
| friends on the line and say "hey guys, starting a new | | | | directors. |
| company, wants to be a investor?" This time they | | | | Annual meetings are held once a year and all share |
| believe in your Idea even though you burned them | | | | holders that have their money on the line with stock |
| on that toilet seat warmer company. So now you | | | | shares are welcome to come. If they are not |
| got investors to put their money on the line. One | | | | available to make it they can be sent a report copy. |
| friend, lets call him Bill, wants to invest $10,000 and | | | | Now if the beginner comes to the meeting and has |
| one friend , let's call him Ted, has a extra $5000 | | | | to say his mind about how he sees the direction of |
| kicking around the house he wants to put in. The | | | | the company headed, that's ok, they will let him |
| rest of your buds still remember the toilet seats so | | | | speak his peace. The thing is if he wants to make |
| they are only going to chip in $500 for a total of 20 | | | | some changes he can put out a motion, but guess |
| friends. Your combined capital now is $24,000, so you | | | | what majority rules and he will most likely to get |
| decide to break apart your company down into | | | | voted down. One guess who has the final word on |
| shares and make each one $500. Now Bill owns 20 | | | | what happens in the company. That's right, guys with |
| 48 shares or 41 percent of your company. Ted owns | | | | the most stock and money on the line, Bill and Ted. |
| 10/48 or about 21 percent of your company. While | | | | Why would people want to own stock in your |
| the rest of your friends make up the rest of the 66 | | | | company? The bottom line is if the investors believe |
| percent ownership. Now let's say you want to make | | | | in the company and that company does well, then |
| it open to people that might not be able to afford | | | | the stock they hold will increase in value. So if you |
| $500 dollars in your town, so you drop the price to | | | | end up selling that beginner stock you purchased for |
| $10 a share. That is common stock in a nut shell. | | | | $10 and the market value is now $15 dollars, you just |
| Now what you have is a lot of shareholders that | | | | made $5 on that share. That's a 50% return. Not bad |
| have invested in your company. Hopefully you | | | | for a beginner. Putting your money on the line with |
| purchased some of those stocks yourself or | | | | stock can pay better than the bank, so it is well |
| convinced them into giving you a invested interest in | | | | worth the risk. |
| the company. Now give your shareholders a stock | | | | Another bonus of your money on line with stock in |
| certificate to prove they own a part of your | | | | the leg warming company is that your stock entitles |
| company. Think of it as a deed on a house or a title | | | | you to dividends. A dividend is what's given back to |
| of a car, except thousands of people can have the | | | | the investing share holders of part of that company's |
| same piece of paper. Now you look at the numbers | | | | profits. But the stock holders don't get all of the |
| after the company is sold and let's say there are | | | | profits. The amount of money paid out to investors |
| 1000 people with money on the line with your stock. | | | | for their stock and the amount of money put back |
| Now if you wanted to make a change in your | | | | into the company is decided by the board. So if they |
| company or sell it, you don't want to have to go | | | | take $5000 for dividends and $5000 back to the |
| running to 1000 people for every single decision you | | | | company, and all the investors stock equal 1000 |
| have to make. Now your company becomes a type | | | | shares, then each stock will pay 5$ each to the |
| of democracy and all the shareholders elect a board | | | | stock holder in your beginner company. That's not |
| of directors. The way that works is every share is | | | | bad for a beginner stock trader . |