By buying stocks or shares of a company, an investor signifies ownership in a corporation and represents a claim on part of the corporation’s assets and earnings. Ownership is determined by the number of shares a person owns relative to the number of outstanding shares.
i.e Company has 1000 shares outstanding stocks
100 of that shares was bought
= 10% of the company and are entitled to that same percentage of its assets
These shares are classified into two:
- Common Stocks
- Preferred Stocks
Common Stocks – a share of the corporation’s profit and at the same time a voting power in shareholder elections. You get voting rights.
Preferred Stock – no voting rights but you are guaranteed priority in the payment of dividends.
Remember that investing in stocks is not risk-free but it can be regulated. Being stockholders of a company means that the investor is ready to accept the risk of his/her assets no matter what condition happens in the market.
The Common Trust Fund however is a form of collective investment maintained by a bank and whose performance is monitored by the BSP (Bangko Sentral ng Pilipinas) Here, the investors sells and buys back his/her units of participation at net asset value.
You may get to read more about the Types of Assets and Funds in the following posts.