Stock Investment, Definition, Types, Methods, Profits and Risks

Who doesn't know stocks? An investment that in recent years in Indonesia is on the rise. Investment is used by the community to develop an asset. Asset development can affect your life to be more prosperous later.

Among the types of investment in Indonesia, stock investment is still the most popular. However, to invest in stocks you can't be careless, especially if you want to develop assets through large amounts of stock.

There are several things that you should know about stock investing first, such as understanding, types, examples, and also the advantages or disadvantages caused by stock investments.

What is Stock Investment?

Quote from InvestopediaInvestment is a way for you to set aside some of your assets or money in one of the financial markets at a certain time and reap it at a later time. Of course, a healthy stock investment will make your money profitable.

Then, what is stock? Stock investment is a financial market instrument in the form of a sign of a person's or business entity's capital participation in a company or limited liability company.

With this stock investment, you also have a claim on assets, company income, and also have the right to attend the General Meeting of Shareholders (GMS).

The purpose of stocks is also usually used to find income or long-term investment. Then, this stock investment is also the company that will manage the assets or capital you deposit, and usually stock investments are used for certain purposes in the future.

Types of Stock Investments You Should Know

After knowing what stock investment is, the next step is that you have to know the types of stock investments circulating in the money market. Reported from OCBC Nisp There are several types of shares that are distinguished by ownership, trading performance, and the manner in which they are transferred.

1. Common Stock

Common stock or common stock is a type of share based on ownership, ordinary shares can claim ownership by adjusting the losses and profits owned by the company. Examples of common stock or common stock are stock warrants.

With common stock, shareholders have limited liability. For example, if a company that provides shares goes bankrupt, the shareholders will only get the last priority in the distribution of company profits.

2. Preferred Stock

The next stock investment is preferred stock investment or stock investment preferred stock which is a combination of bonds with common stock investments, therefore the interest earned on preferred stock investments will be fixed. Usually you can find preferred stock on the Indonesian stock exchange with a 4 letter code or an additional 'P' behind it.

3. Shares on Show

This investment in performance shares is also commonly referred to as bearer stocks, this stock investment also usually does not have a written ownership name. The reason is that it is easy to transfer without going through a legal entity.

4. Shares in the name of

As the name implies, stock investment in the name has written evidence in its ownership. To move or transfer, of course, must go through a legal entity.

5. Income Stock

Investation income stock are stocks that usually pay higher profits or dividends than the previous period. This makes income stock income always increases in each period.

6. Growth Stocks

Growth stocks is a stock investment that has high stock growth. However, usually not all high-ranking companies have growth stocks. 

Growth stocks divided into two, namely Well-Know, growth stocks from the company is quite high. Meanwhile, lesser-know usually comes from growth stocks which companies are less popular.

7. Blue Chip Stocks

This stock investment is usually issued by a high company or has a stable income and is also consistent in paying profit sharing. This type of stock investment is also often targeted by investors.

8. Cyclical Stock Counter

One of the stock investments that will have no effect on the ups and downs of the economy is countercyclical stocks. So the condition will always be stable, but profit counter cyclical stock adjusted to the company that issued the shares.

9. Speculative Stocks

The last type of stock investment is speculative stocks that provide inconsistent returns, but have high returns.

Advantages of Stock Investment

It is mentioned that this stock investment will be very influential for prosperous finances later. According to Indonesian Stock ExchangeThere are three stock advantages that can be obtained from investors or you who buy shares.

1. Capital Gains

The first advantage of stock investment is capital gain, which is the difference between the selling price and the purchase price. Capital gains also usually come from stock trading activities in the secondary market.

2. Dividend

Stock investment also has advantages in the form of dividends, namely the distribution of profits by the company which of course is also generated by the company itself. The distribution of this dividend must obtain the approval of the shareholders in the GMS.

Dividends given by companies are usually given in the form of cash or stock dividends. Of course, if it is in cash, it is in the form of rupiah. Meanwhile, stock dividends will be in the form of shares which will later be added to the shares owned by investors.

3. Can be done anywhere

Investing in stocks can be done anytime and anywhere. Purchases of shares are also mostly done online online from sale to purchase. So it will not interfere with your activities.

Stock Risk

In addition to the advantages, stock investing also has risks that you must avoid:

1. Capital Losses

In contrast to capital gains, capital loss is a condition in which investors sell their shares lower than the previous purchase price.

2. Liquidity Risk

Shareholders can get last priority after if the company whose shares are owned is declared bankrupt by the court. If the company still has the remaining assets, it can also be divided in its entirety among all shareholders. However, this claim must be made when the company has fulfilled its obligations.

So, you must continue to follow the development of the company from the shares you own. It should also be remembered that the shares outstanding in the secondary market will always increase and decrease.

What is the Difference Between Stock Investing and Stock Trading?

Maybe you often hear stock investing and stock trading, namely the first, the stock trading period will be shorter than stock investment, stock trading also has more of a goal to make a profit from the number of shares bought. Meanwhile, stock investment emphasizes long-term profits.

Finally, traders who trade stocks will not get the advantages of stock investments such as dividends, bonuses, and stock splits. 

Also keep in mind that to invest in stocks, you have to deposit capital assets that are not from emergency funds or give all the capital you have, because this stock investment will have ups and downs of activity.