Fin571 Week 4 Team Paper

Our team discussed how markets and investors value stock, according to the video “Stock Markets and Valuation” (Wiley, 2015).   We learned what the difference in between stock and bonds in a company and their many advantages.
Defining Stocks and Bonds
Stocks and Bonds are a type of asset investor’s use in their portfolio.   Stocks offer an ownership stake in a company, while bonds are loans made to a company (a corporate bond) or other organization (like the U.S. Treasury).   In general, stocks are considered riskier and more volatile than bonds.   However, there are many different kinds of stocks and bonds, with varying levels of volatility, risk and return ("Diffen", n.d.).
There are two types of stocks: Common Stock and Preferred Stock. “Preferred stockholders have a greater claim to a company's assets and earnings. The dividends of preferred stocks are different from and generally greater than those of common stock. When you buy a preferred stock, you will have an idea of when to expect a dividend because they are paid at regular intervals. This is not necessarily the case for common stock, as the company's board of directors will decide whether or not to pay out a dividend” (Investopedia, 2015).
Ownership or Loan?
After watching this video we have learned how stocks represent ownership within companies.   In years past, when someone bought stock in a company, they would receive a physical certificate providing how many shares in a company, however now it's just a paper sent through the mail.   Having a working knowledge of basic economics is crucial in success as a stock investor.   The stock market and the economy are good or bad which have a direct effect on the other.   Understanding basic economics can help filter financial news and separate relevant and irrelevant information in order to make better investment decisions.  A bond is a form of loan: the holder/owner of the bond is the lender (creditor), the issuer/receiver of the bond is...