Definition of stocks: benefits, types and risks of investing stocks

For those of you who struggle in the business world is certainly familiar with the name of the stock. Many of us know only shares, but do not know any further or have a unfamiliarity about the understanding of stocks.

For those of you who want to plunge into the world of stocks, or for those of you who wish to know the stocks. It is necessary to do an introduction around the stock, you can see the understanding of stocks, benefits, types and risks of stock investments.

Definition of stocks

The meaning of shares is a valuable document that shows ownership of a company. So when someone buys a stake from the company, that person has purchased part of the company’s share ownership.

The meaning of the word stock can also be interpreted as a unit of value in various financial instruments referring to the part of ownership of a company. When a person buys a share of a company, then the person has the right of the asset and the income in accordance with the shares they bought.

Simply put, stocks are a tool of proof for ownership of a company. The existence of a stock is usually a piece of paper in which it is mentioned that the owner of the letter is the proprietor of the company that issued the securities.

Understanding shares according to experts
So that you are more aware of the meaning of a stock, here are the experts ‘ opinions on the understanding of stocks.

#1. A. Raharjo

The first opinion of Sapto Raharjo, he argued that shares are a securities which are instruments of proof of ownership or inclusion of an institution or individual within a company.

#2. Nofie Iman

The next opinion is from Nofie Iman, the sense of the stock according to him is a marketable letter that gives high chances of profit but also has a high risk.

#3. Swadidji Widoatmodjo

Swadidji Widoatmodjo, according to her shares are securities issued by a company in the form of a limited liability company or so-called issuer.

#4. Tjiptono Darmaji and Heny M. Fakhrudin

The final opinion of Tjiptono Darmaji and Heny M. Fakhrudin, they argue that the shares are proof of ownership of a person or agency against a company or limited company. This stock is a piece of marketable securities explaining that the owner of this letter is the owner of the company that issued the marketable.

Types of stocks

Based on the ability in bills and claims, these stocks can be distinguished into 2 types, the following is a brief explanation.

#1. Ordinary stock (Common Stock)

There is a common stock name, where this stock can be claimed based on profit and loss that occurs in a company. If the liquidation is done, a shareholder can be the last priority in the dividend distribution of the company’s assets.

Shareholders on ordinary stocks have limited obligations. So, in other words when the company has gone bankrupt the greatest losses will be borne by shareholders is the amount of their investment in the stocks they buy. Here is a hallmark of the usual stock:


  • Shareholders have limited liability
  • Shareholders have voting rights when the Board of Commissioners election
  • The rights of shareholders will be precedence when the company publishes a new share.


#2. Preferen (Preferred Stoc) stock

Preferred stocks are shares that fortunately the distribution remains, when the company suffered a loss then the shareholder will be given the top priority in the revenue share for the company’s assets.

This type of stock is in common with bonds, where there are claims on profits along with previous assets, fixed dividends during the validity period of the shares, have the right to redeem, and can be exchanged for ordinary shares. Here are the preferred stock features:

Stocks can be exchanged into ordinary shares through inter-company agreements with shareholders
There are several levels that can be published with different characteristics
There are bills on asset income and revenue, and it also gets the highest priority when it comes to dividend distribution.
When viewed from the trading performance, the type of shares can be grouped into 5 types, namely:


  • BlueChip Stock, which is a common stock of companies with a high reputation, has a stable income, become a market leader in similar industries, and consistently in paying dividends.
  • Income Stock, i.e. the shares of an issuer with the ability to pay dividends above the average dividend payment average of the year preceding. These stocks could provide greater income and routinely pay a cash dividend.
  • Growth Stock, is a stock consisting of well-konwn and lesser-known. Well-Known is a stock of issuers where high revenue growth, has a high reputation, and markets in similar industries. Lesse-Known is the stake of the issuer who is not the market leader in the industry, but this stock has a feature of growth stock.
  • Speculative Stock, is the share of a company that has not been able to have a regular income every year, but the company has a potential for high income in the future.
  • Counter Cyclical Stocks, is a stock that is not unaffected by the macroeconomic conditions or other business situations. Although the economic recession is happening, the value of this stock can remain high and can earn a high income so it can provide a high dividend as well.

Benefits and advantages of stocks


The main benefit of a stock is that it can be used as a short-term investment. Those who use stocks for long-term investments are those who routinely buy stocks or can arguably save on stocks. As for those who use stocks for short-term investments usually only want capital gains from the difference in the buying price and the selling price.  There are two advantages that can be obtained from stock investors, namely:
  • Dividends, is the profit gained from the distribution of cash dividends of an issuer. Dividends are the additional revenues that the stockholders obtain if they purchase shares from issuers who have good performance.
  • Capital Gain, is the profit gained from the difference in the selling price of shares with the purchase price. Each stake owner benefits according to the size of their shares.

Stock investment risk

There are a lot of benefits that can be gained from stock investments, but there is still a shortage and risk of investing in stocks. Here are some risks in stock investing that you need to know.

#1. Liquidation risk

Liquidation risk can occur when the issuer is bankrupt or liquidation where the stock investors have the right to claim the latest activity from the company after the obligation of the issuer pays off. Even more paraphrased investors can not get anything when assets are not left after the issuer pays their obligations.

#2. No dividend distribution

This can happen when the issuer uses the company’s profit to expand its business until it decides not to share the dividend to the shareholders.

#3. Investor Loses capital

This can happen when the selling price of the stock they buy has a lower price than the stock purchase price, so the shareholders will lose their capital.

#4. Delisting stocks from Bursa

Last is the stock removed from the listing, this resulted in the stock being untradable. Because of this, issuers and shareholders will be very likely to lose.
Well, that’s a blogitech information you can tell you about the understanding of stocks and the benefits, types, and risks of stock investments you need to know. Hopefully what we delivered was useful and can add to your knowledge of stocks. If there is an error in this article I apologize, please correction with the comments below, thank you.
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This field is actually a lot of branches but especially in this article that we will discuss this time about stocks. That is then made clear by Sub-division of the understanding of shares, the understanding of stocks according to experts, types of stocks, benefits and profit stocks, and the risk of investment shares. Then immediately I will write the explanation below, please listened to good good understanding the stock, types, benefits and risks of buying and selling stocks.

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