The stock market is a device for transferring money from the impatient to the patient. — Warren Buffett
If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes. — Warren Buffett
if you want to build wealth in stock market. you need to know difference between common stocks and stock market.
Common Stock 0r Share
Common stock or share is a type of ownership unit in a company. By owning a share you might get a share of future profit if company shares the profit.
- Companies issue stocks or shares to raise capita, first in an IPO (Initial public offer) and later may issue more stocks rarely as its too expensive to issue shares rather than borrowing. Issuing shares will make company unattractive to investors because more people will own a piece of the company and less profit will be shared.
- Some companies share percentage of profit as dividend (quarterly, yearly) and its not always guaranteed. Companies can pause or stop paying dividend any time.
- You cannot sell common stock back to the company and get your money back. You can only sell stock in Stock Market.
- Stock is owned by individuals, mutual fund companies, banks et..
Stock Market
Stock Market places where investors can buy and sell stock or share of publicly traded companies. Stock are traded by bidding like in auction houses. Stock exchanges .are the places you can buy and sell listed companies in that exchange. example: NASDAQ, etc..
- Place to buy more shares for lowest bidding price to increase your ownership of the company or to sell later for profit.
- Place to sell shares for highest bidding price to make profit.
- NOTE: you can only buy and sell stock in stock market.
- You cannot time market to sell or buy blindly.
Company Stock Vs Stock Market
You can clearly see the disconnect between company IPO (Initial public offer) stock price and its value in he stock market. Stock value is the perception bidders.
People usually buy and sell stock with out the knowledge about a company’s (Business, Management, Revenue, cash flow etc..). if you don’t know about the company how can you bid for good price to buy or sell stock? Read more about the Mr.Market from legendary investor Benjamin Graham about blindly investing in stock market for quick wealth..
Warren Buffett on stock “Price is what you pay; value is what you get.”
Benjamin Franklin believed that an “investment in knowledge pays the best interest.“
Disclaimer –
“Believe nothing, no matter where you read it, no matter if I have said it, unless it agrees with your own reason and common sense.” – Buddha