So the shareholders basically own the shares that are issued by a company.
Speculation is a skill that needs to be mastered because while some may have become rich other may even lose their capital through speculation.
The difference between investment and speculation is that the investors are interested in the process of why the underlying price of a company should rise and they stay invested in the company for a long time. Speculators, on the other hand, are interested only in the price and do not need to know the reason behind the rise or fall in price. They stay invested in the market for a very short term.
A stock is a share in the ownership of a company. It represents a claim on the earnings and assets of a company. When you acquire more stocks of a company your ownership stake also increases. However, the definition is not exactly correct.
It is important to understand that when you hold the stocks of a company you do not own the corporation. You just own the shares that the company has issued. Companies are organizations and they are legal entities. They file taxes, own property and borrow money from banks. The company owns its own assets and the office of the company is owned by the company only and not by the shareholders.
This distinction means that the property of the company is separate from the shareholder’s property. This limits the liability of the shareholder as well as the company. In case the company goes bankrupt then the company may have to sell off all its assets, however, the personal assets of a shareholder are not at any risk. In fact, if you wish you do not even have to sell off your shares. But the share value of the company would have fallen by a great value. In a similar way in case a shareholder files for bankruptcy, he cannot sell the company’s assets to pay off the debts.
So the shareholders basically own the shares that are issued by a company. The company owns the assets. So in case you own 10% of the company shares, it does not mean that you own 10% of the company. It just means that you own 10% of the company’s shares. The shareholders have no rights on the assets of the company. This is known in financial terms as “separation of ownership and control”.
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