Have you ever wondered about what actually happens after you buy a Stock?
Will you receive a Welcome Pack? Will you receive any material form of the Stock? Will you be added to the organisation’s mailing list?
In this article, we will walk you through the aftermath of becoming a Stock owner.
If one is looking to buy a share in any company, they can do so by placing an order through a stockbroker. This can either be a licensed representative working in a broker’s office, or the order can be placed online using an electronic stockbroker.
Either way, once the investor purchases their desired Stock, the stockbroker will charge a commission for the purchase or sale of a Stock.
Once the share, or Stock, is purchased, it will show as a holding in the investor’s account.
Now, most Stocks only exist in an electronic form.
There is no such thing as a material form of a Stock, nor there are any stock certificates with the investors’ names on them (as cool as that would be!).
All electronic shares are held in the broker’s computer system and credited to the investor’s account.
All of these shares will stay in the investor’s account until they decide to sell their Stocks or alternatively transfer their Stocks into another broker or account.
The value of Stocks constantly changes, some more than the others, some days more than the rest.
The Stock value will constantly move and down as they are traded on the Stock exchanges.
Now, the investor will own the same number of shares that he purchased, but the per-share value can (and in many cases will) change with the current market value of the shares.
The goal is to have the shares increase in value over the purchase price.
If you buy a share in a company, it doesn’t necessarily mean that you will end up only owning that one share.
At many occasions, the number of shares an investor holds changes.
This is due to a number of different reasons.
If the organisation declares a stock split or stock dividend, the investor will accumulate additional shares.
In time, stock splits can significantly increase the number of shares the investor owns.
For example, if you bought one share of Coca Cola in 1926, you would now own 4,609 shares.
Not too bad, right?
And let’s not forget about dividends – a portion of the companies profits paid to their shareholders.
If applicable, these dividends are credited to the investors’ accounts as cash.
Now, going back to our Coca Cola example, you would have earned $8,491 in dividends by now.
If you feel like its time to sell your Stock, you can again do so through your Stockbroker.
The actual selling process is simple as the electronic system will find the buyer for you automatically.
And that’s it! Once the stock is gone, it’s gone!
And the same goes for this article…
Once all the steps are done, so is this blog!
See you in the next lesson.
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