The New Student's Reference Work/Stocks

Stocks are the rights in the property of a corporation which those persons possess who have contributed to its capital. Each corporation has a certain capital-stock which may be raised for the purposes of its business but need not be fully paid up. This amount is divided into shares. Certificates are made out for these shares, say $100 shares or $10 shares as the case may be. These certificates are sent to those who have paid up the capital, in proportion to the amount which they have paid. Thus if the stocks be at par, a man who had subscribed $1,000 to a certain stock would receive ten $100 certificates. But the business of the corporation may fall short of expectations; or it may exceed them. In the former case the value of the paper certificates will decrease; in the latter case it will increase. So a stock is rarely at par, i. e., at such a mark that a hundred dollar certificate is worth exactly one hundred dollars. Stocks are liable to fluctuate in value not merely according to the value of the business which they represent, whether a mine, a railroad, a great commercial concern or what not, but according to the plentifulness or scarcity of money which is being invested.

There are many who almost gamble on the fluctuations of stocks. Some buy merely in order to sell; and it is to their interest to bull the stock or advance it in price. Others sell stock which perhaps they do not possess; believing that, by the time they will be compelled to hand over the stock, they will be able to buy it more cheaply than they have agreed to sell it. In the stock-market the former class are known as “bulls;” the latter as “bears.” The mere manipulation of stock is undesirable. The member of the public who thinks that he can compete with the professional stockbrokers is likely to suffer heavy loss. He will do better to make a genuine investment in a stock, with the idea, not of selling, but of getting good interest on his money from the dividends which the stock pays out of the proceeds of the business which it represents. On every transaction in stock the buyer or seller pays one-eighth per cent. of the money which he pays or receives for the stock to a broker. The number of brokers in a stock-exchange is limited. Their seats are property, and may be inherited; but they are occasionally sold to a would-be broker. A seat in the New York Stock Exchange has sold for $88,000. See Board of Trade.