Stock

A share of stock is the smallest unit of ownership in a company. It describes a part owner of the company. If the company distributes profits to shareholders, share holders will likely receive a proportionate share.  One of the unique features of stock ownership is the notion of limited liability. If the company loses a lawsuit and must pay a huge judgment, the worse that can happen is stock becomes worthless. However, the creditors can’t come after share holder’s personal assets. There are two types of stock, namely: Common stock and Preferred stock.

Common stock represents the majority of stock held by the public. It has voting rights, along with the right to share in dividends. Stock is being up or down in stocks market, they always refer to common stock. While, preferred stock has fewer rights than common stock, except in dividends. Companies that issue preferred stocks usually pay consistent dividends and preferred stock has first call on dividends over common stock. Another benefit of common stocks is that they are highly liquid for the most part. Small companies may not trade frequently, but most of the larger companies’ trade daily creating an opportunity to buy or sell shares. We can buy or sell shares of most publicly traded companies almost any day the markets are open.

Investing is the proactive use of our money to make more money, or it simply says, money is working for us. Focus in investing is on return and can run the spectrum from conservative to very aggressive in terms of risk. One way we measure results is by the expected return weighed against the anticipated risks. It is easy to slip into an unnecessarily complex discussion about whether a particular financial transaction was an investment or a savings deposit. However, it is important to understand that investing has some distinctive characteristics, which separate it from pure savings.

When we own stock, we participate in the growth of the company. As the value of the company increases, so does our investment. If profits increase, we may receive bigger dividend checks. The stock price may continue to rise for a long period. However, along with the potential for extraordinary gain is the potential for loss. We can lose money investing in stocks. Hence, we must weigh the potential reward against the risk of an investment to decide if the “pain is worth the potential gain”. All investments carry some degree of risk. The rule of thumb is “the higher the risk, the higher the potential return”, therefore, we must know where your comfort level is and be able to correctly gauge the relative risk of a particular stock or other investment. The elements that determine whether we achieve investment goals are: amount money we invest; length of time of investment; rate of return/growth; less fees, taxes, inflation, and so forth.

Investors can control some of the risk in their portfolio through the proper mix of stocks and bonds. Most experts consider a portfolio more heavily weighted toward stocks riskier than a portfolio that favors bonds. The first step is to determine the “risk-free” return available in the market. This is an investment you could own that is without risk and serves as a baseline for your measurement. We use Bank Indonesia’s rate for the benchmark, any investment with risk must return higher than this rate.
Some market movers are obvious, while others creep up on us unseen. Following list may cause the market to change direction or speed up or slow down its momentum, we have to concern about:
 Inflation
 Interest rates
 Oil/Energy Price
 War/Terrorism
 Serious domestic political unrest                                  (Dedianto Turnip)