Finance: Investment Stocks

Investment stocks are considered risky products for ordinary investors. Yet, they can generate higher profits than other types of investments due to their potentials. However, you must be careful with this type of investment since the world economy is still unstable and may entail possible dangers for your investments. If you want to invest in this type of stock, you should have some knowledge. For your benefit, here are the things you have to know about this product. First, there are two types of investment stocks — closed-end funds and mutual funds. Closed-end funds usually invest in only one sector while having no limit for their price range, unlike with mutual funds. On the other hand, mutual funds are invested in many sectors that have different market values. Second, you have to know where these stocks are being traded before investing in them. Investment stocks are being sold on the secondary market or issuing market. This means that they can be either issued at first or bought from their existing owners. The stocks issued at first can be purchased from the issuing company. Third, you have to determine the price of the stock before buying it. For this, you need to know what types of stocks are there and how they were valued. There are two types of stocks: common and preferred. Common stocks give their owners dividend payments; on the other hand, preferred stocks don’t give any dividend to their owners. Stocks are usually valued based on their par value. Fourth, you have to consider the early redemption policy of the issuing company before you buy their stocks at first. If there is no early redemption policy, you cannot resell their stock anytime; it will be available only for a particular time, so it is hard to determine its price. Fifth, you have to study the company’s prospectus before you buy their stocks. You can find this document in the issuing company or ask them directly about it. This will give you an idea of what kind of investment company it is and how its system works. Lastly, you have to know when and where to purchase these stocks. There are two ways of buying investment stocks: participating and non-participating. Participating type is when an investor joins the selling process by selling directly to the issuing company; on the other hand, the non-participating type doesn’t enter the selling since there is already a seller.

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