Selling common stock shares

Selling common stock shares

Selling common stock shares is not a hard thing to do however to many people who are unfamiliar with investing in equity stocks the process can seem unclear. First is is essential to understand exactly what common stock shares are.

The idea behind this strategy is to stick to what you know about. Many investors make the simple mistake of ploughing their hard earned savings into the latest stock tip that they have little or no knowledge in. This is a sure fuire way to lose money in the long run, just look at the large numbers of amatuer investors that lost thousands on dot com stocks during the dot com bubble crash a few years ago. Instead this approach advises investors to only invest in companies or sectors that they have experiance or knowledge of.

What is common stock?

Common stock shares are just that. They are shares of a company. Companies require investor’s money in order to generate business (to pay for stock, to invest in offices, factories etc). By selling common stock to individuals they are selling part of the ownership of the business in return for this money to fund the business.

If the company does well, and generates good profits it’s overall value will increase (because it will be expected to continue to make good profits in the future), meaning that the shares or stocks of the company will increase. From the investors perspective you should aim to buy stocks that are under valued or in other words don’t fully reflect the expected future cash flows of the business. If you can do this the hope is that the market will correct this in the future, pushing up the stock price and the value of your investment.

Spotting Mega Trends to invest in

As well as spotting new innovative products that you feel may take the market by storm and become a cash cow that sends the stock of the producer rocketing it can even pay to take a step further back and look for what are called mega trends in the economy.

A great example of this is the boom in recent years of the commodities markets. Much of this boom has been attributed to the rapid growth of the economies of China and India. Again it would not have taken an economist to spot that with booming populations and economies such as these the demand for commodities such as iron, steel, oil, wheat etc was and maybe still is likely to outpace supply. To apply a smart stock investing strategy you would just need to identify such a trend then attempt to pick individual stock or fund investments with exposures to these sectors or industries.

In addition to owning a piece of the company and offering the investor exposure to potential gains in the stock prices common stock shareholders have other rights. Most companies when they are profitable pay a dividend to shareholders. This is a percentage of profits and can be thought of as interest payments on the investors initial investment. Investing in companies that pay high dividends is called Income Investing, as opposed to focussing only on picking stock that may increase in value (Growth Investing). In addition each common stock shareholder has the right to vote at the companies Annual General Meeting (AGM).

How to sell your common stock

How you sell your stock will very much depend on how you acquired it. Options for selling include at a bank, through a stockbroker or via an online brokerage account. If you expect the transaction or sale to be a one off event then the easiest solution would be to sell the stocks at you local bank. Most high street banks these days offer stock trading services. You’ll simply need to take the share certificate into the local branch and ask to speak to the investment department.

If you plan on investing heavily in the future or require advice about how much stock to sell and when or require possible suggestions about what to invest the proceeds in then finding a personal stock broker could be a good option. The benefits are that they offer independent advice and many offer managed services where they will actively manage your stock portfolio. The downside are that they can be very expensive as they’ll be taking a hefty commission on all trade they do so by default they are incentivised to trade frequently, even if it is not in your best interests.

The most popular and suitable option will be an online brokerage account. The prevalence of the internet and huge competition in this sector has meant that trading costs in online account have tumbled. All you’ll need to do is choose the broker, register online and then send off the share certificate. Once they have received the stock it will be held in a nominee account by the broker in your name. It usually takes up to a couple of weeks before the stocks are available for sale. In addition to very low commissions most online brokerages off a vast amount of free news, investment analysis tools and articles that may be useful if you intend to invest in other stocks.