{"id":25495,"date":"2020-02-13T00:00:00","date_gmt":"2020-02-12T23:00:00","guid":{"rendered":"https:\/\/finmarie.com\/financial-literacy-for-women-understanding-stocks\/"},"modified":"2022-10-04T10:34:32","modified_gmt":"2022-10-04T09:34:32","slug":"financial-literacy-for-women-understanding-stocks","status":"publish","type":"post","link":"https:\/\/finmarie.com\/en\/financial-literacy-for-women-understanding-stocks\/","title":{"rendered":"Financial Literacy For Women \u2014 Understanding Stocks"},"content":{"rendered":"

Among other reasons, a lot of women shy away from investing<\/strong>, because they cannot figure out the market, its products, and the processes. Many still leave money issues to their partners, husbands or finance consultants. But since often the lack of comprehension comes with skepticism and fear of a stock market crash like the one in 2008, lots of women won\u2019t neither trust their investment advisors<\/a> for real. This way, they end up in a dilemma that offers one sole way out: women need to understand finances<\/strong>.<\/p>\n

With this blog, FinMarie strives to not only make financial literacy for women<\/strong> accessible, but also make it easily understandable and contribute to strengthen the movement that keeps pushing on with financial competence for women. That\u2019s why with today\u2019s post we want to help you understand stocks<\/strong>.<\/p>\n

If you\u2019re curious about further news from and insights into the world of investments, just subscribe below, and receive every freshly published article by e-mail:<\/p>\n

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Understand Stocks With This Example<\/h2>\n

Imagine you want to start your own business, let\u2019s say a restaurant. For doing so, you need 100,000 Euros, but you have only 10,000 available.<\/p>\n

So, in order to collect the necessary amount, you decide to ask friends and family, if they wanted to participate. If nine friends of yours threw in another 10,000 Euros each, every one of you holds the same share<\/strong> in the business.<\/p>\n

The total of all your ten shares equate to the restaurant\u2019s total value, i.e. the 100,000 Euros.<\/p>\n

Some years into your running the business it has gained in popularity and evolved to being the city\u2019s go-to place. By now, its aggregate value amounts to a million Euros<\/strong>. That\u2019s ten times the initial value.<\/p>\n

This means, that you and your friends each now own a share worth 100,000 Euros<\/strong>, instead of the initial 10,000. These shares are what stocks at the capital market are.<\/p>\n

Financial Literacy For Women: What Are Stocks?<\/h2>\n

Stocks are securities that represent a part of the businesses capital. Basically, by offering stocks, enterprises sell shares of their own company<\/strong>. If you invest in stocks, you become somewhat of an associate. A shareholder, in investing terms.<\/p>\n

For businesses, stocks are a way to receive money<\/strong> that they can use to finance trades and acquisitions, production, research, and purchases. Always focussing on expanding their affairs and activities without making any debt.<\/p>\n

All stocks summed up and multiplied by their market price reveal the current enterprise value \u2014 i.e. the 100,000 Euros in our example above.<\/p>\n

The development of a stock\u2019s value<\/strong> depends on how well the business that offers these shares is administered. If your restaurant above were maladministered and you had made any profit, maybe your and your friends\u2019 shares would have been worth only 5,000 Euros each after some years. You would have, hence, sustained a loss.<\/p>\n

So, stocks are a way to buy a share in an enterprise. Once you own such shares, you have two different types of rights: property claims and administrative claims.<\/p>\n

Property claims:<\/b> This means that, if the enterprise makes a profit, you\u2019re entitled to a part of said profit. Due to the increase in the enterprise value, the shares, too, increase in value. This way, you gain from your listed stocks.<\/p>\n

Administrative claims:<\/b> These give you the right to participate in business affairs. For instance, you could propose candidates for the company\u2019s administrative board.<\/p>\n

Which rights you\u2019re entitled to precisely as a stockholder depends on the type of stock you buy. There are several types of stocks<\/strong> providing different rights and claims for investors.<\/p>\n

Financial Competence For Women: Types Of Stocks<\/h2>\n

Not all stocks are the same and, hence, they don\u2019t come with the same property or administrative rights. It\u2019s the enterprise to decide which claims you\u2019re entitled to as a stockholder, since it\u2019s up to the company to determine the characteristics of its stocks. The two most common types of stocks are:<\/p>\n