What is Common Stock?

Physician Investing Basics

By Julia O’Neal; MA, CPAfp-book1

Common stock is fractional company ownership and does not have to pay a specified dividend. It is assigned a par value only for bookkeeping purposes on the balance sheet. (Additional value of book equity is called paid-in capital or capital surplus.) 

Par Value not Market Value

Par value has no relation to market value. Some types of preferred stock do not carry voting privileges, but common stockholders must vote on certain corporate matters, such as the election of the board of directors.

Classes  

Moreover, there are some companies that offer two, three or more different classes of stocks under Common Stocks. They often call these as Class A, Class B and Class C, etc. Class A stock holders have literally more voting rights than Class B stock holders, and so forth.

Company stocks that have more than one class is not a common stock and most physicians and investors refrain from buying company stocks with more than one class; unless carefully evaluated.

Stockholders are invited to attend the annual meeting to vote, but may also vote by mail, in a proxy vote.  

Conclusion

And so, how much common stock do you own?

 

One Response

  1. We are now in a buy-and-sell environment. It is important to buy low and sell when FMV is reached. If we overpay for a stock, it’s usually because we overestimated earnings power, or weren’t look for enough of a margin of safety, or both.

    And, don’t let “anchoring” drive your decisions. When we’re losing money we tend to “anchor” ourselves a price based on what we paid for it. . Thus, we don’t sell the stock at any price below our purchase, even if we believe that the company is not worth the purchase price anymore. Instead, we need to forget what we paid for our stocks and revalue them.

    Beware, this bear’s rally.

    The Stock Psychologist

    Like

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