A share of stock represents a tiny share of a company. Stocks are sold in different stock markets or exchanges. The two major exchanges are the New York Stock Exchange (NYSE) and NASDAQ or the National Association of Securities Dealers Automated Qutation system.
To buy stock, you place an order with a broker. A broker is someone who completes transactions between buyers and sellers. There are different types of brokers:
full service- provide investment advice and recommendations
discount- place orders at a low price but limited advice
electronic- place orders over the Internet
In addition, some mutual fund companies offer brokerage services.
There are two types of stocks: common and preferred. There are two difference between the two types of stocks. A company will decide whether or not to pay a dividend or a percentage of it's earnings to stockholders. Preferred stock pays a guaranteed dividend. If a company goes out of business, their assets are used to pay off bond and stockholders. Preferred stockholders are paid before common stockholders. If there is no money left then common stock holders will not be paid.
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