The stock market can be a complex and intimidating topic, but understanding the basics is essential for making informed investment decisions.
What is a Stock?
A stock represents ownership in a company. When you buy a stock, you essentially purchase a small portion of that company's assets and profits.
- Benefits: Stocks offer diversification, potentially lower volatility, and the potential for long-term growth.
- Drawbacks: Stocks come with risks, such as loss of principal investment, and may not be suitable for all investors.
Types of Stocks
Certain types of stocks are more liquid or marketable than others. Some common examples include:
- American Depositary Receipt (ADR): ADRs are traded on the over-the-counter (OTC) market and often have a lower price than their parent company's stock.
- Global Depository Receipt (GDR): GDRs are also traded on the OTC market and offer investors exposure to foreign companies and markets.