The most important thing in brief
- Definition: Stocks are securities issued by companies and
typically traded on the stock exchange. Buying a stock means acquiring
partial ownership of a company.
- Return: If the company performs well, shareholders can
benefit through rising share prices and dividends, potentially earning
attractive returns.
- Risk: Stocks are subject to company-specific and
market-wide risks. To reduce risk, it’s advisable to diversify investments
across multiple stocks.
What Are Stocks?
Stocks are securities that represent a share of ownership in a company. They are issued by
companies and traded on the stock exchange. Publicly listed companies usually operate as
joint-stock corporations (AG). When investing in stocks, investors become part-owners of the
company. Returns are generated through rising stock prices and dividend payouts, which
represent a share in the company’s profits.
What types of stocks are there?
Aktien lassen sich in verschiedene Arten unterteilen. Diese unterscheiden sich
bezüglich der Aktionärsrechte und -pflichten. Folgende Aktien gibt es:
Ordinary shares |
With common shares, investors gain both ownership and voting
rights, allowing them to vote on important matters at the
company’s general meetings. |
Preferred shares |
Preferred shares do not carry voting rights but typically offer
advantages such as higher dividends compared to common shares.
|
Registered shares |
Registered shares are recorded in the shareholder register,
making ownership transparent. However, trading can be restricted
by the company’s approval requirements. |
Bearer shares |
Bearer shares do not disclose the shareholder’s identity to the
company, allowing easier trading without the need for
registration or approval. |
Old and new shares |
To raise equity, companies can issue new shares. Those issued
during a capital increase are called "new shares," while
existing ones are "old shares." |
Par value shares |
Par value shares divide company capital into unequal portions,
such as 20,000 shares at €5 and 2,000 shares at €50. This plays
a role during company formation. |
No-par value shares |
No-par value shares divide capital equally. For example,
€2,000,000 in capital can be split into 20,000 shares worth €100
each. |
What Is a Share Worth?
To determine a share's value, the company’s equity (or share capital) is divided by the
number of shares issued. This value is known as the nominal value. For example, if a company
has issued 1,000 shares, each share represents one-thousandth of the company. When shares
are traded on the stock exchange, the market price becomes the key factor in purchasing a
share.
What Is the Difference Between Nominal Value and Market Price?
In addition to the nominal value, a share has a market price. The nominal value reflects the
fixed portion of a company’s share capital and remains constant. The market price, however,
is the value of the share at a specific point in time on a trading platform such as a stock
exchange. It fluctuates over time.
How Is a Share Price Determined?
The share price — or market value of a stock — is determined by supply and demand on the
stock exchange. If demand is high, the price rises. If many investors sell, supply increases
and the price falls. Several factors can influence supply and demand and, therefore, the
stock price:
- General economic conditions
- Company-specific metrics (e.g. profit, revenue, cash flow, debt)
- Business model and long-term potential
- Interest rate trends
- Competition
- Regulation
Investing in Stocks
Stocks allow investors to participate directly in a company’s potential profits through
dividend payments. When a company performs well, rising share prices can also lead to
capital gains. Stocks can be bought and sold during trading hours. Shares of established
companies generally offer high liquidity, making them easier to trade.
What Are the Risks of Investing in Stocks?
Investing in stocks carries both opportunities and risks. Investment risk can be reduced
through diversification — spreading capital across multiple investments. Stock-related risk
is primarily influenced by the following factors:
- Company-Specific Risk: A stock’s price can be influenced by
internal company factors, such as management decisions. Poor decisions can
negatively affect prices. That’s why it’s wise to invest in multiple stocks to
reduce exposure to any one company. This is known as diversifiable risk.
- General Market Risk: Market risk is not tied to any specific
company but affects the entire stock market. It includes risks from economic cycles,
interest rate changes, or political events. Even if a company remains stable, its
stock price may fall due to external market pressures. Market risk cannot be fully
avoided. For example, the COVID-19 pandemic impacted many sectors. Selling during a
crisis may mean missing the recovery period that follows.
What Is a Stock Index?
An index reflects the performance of a set of specific assets, such as stocks or bonds. A
stock index shows the value development of the companies it includes. It can consist of
securities from a specific sector, geographic region, or quality classification. For
example, the German stock index (DAX) includes the 40 largest and most liquid companies in
Germany.
Investing in Stocks Diversified and Long-Term with ETFs
ETFs are exchange-traded index funds that replicate the performance of an existing index.
They allow investors to invest in entire stock indices rather than individual stocks. This
enables automatic investment across multiple companies, industries, countries, or sectors —
effectively spreading risk. WeltSparen’s asset management offers investors a diversified
investment strategy. By assembling a strategic ETF portfolio, market risks can be minimized
while opening up opportunities for attractive returns.
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Risk Notice: Every capital market investment involves
opportunities and
risks. The value of investments can rise or fall. In the worst case, a total loss of the
invested amount is possible. You can find all detailed information under Risk Notices
.