Many people not familiar with the financial industry can be confused with all the arcane jargon, terms, and concepts that are used by experts. Two terms that are often mentioned are “commodities” and “stocks.” These two separate terms refer to two of the most common financial products sold in the world. Read on for more information on commodities and stocks.
Commodities refer to basic, fundamental goods that are considered to be of equal worth regardless of their producer. A commodity can be a barrel of oil or a bushel of wheat, or a crop of oranges. Again, the key to understanding what a commodity is is to remember that it is a resource good. The quality of these commodities is established by market bureaus which regulate their sale. For example, the trade and sale of many agricultural commodities is regulated and standardized by the Chicago Board of Trade.
A stock, on the other hand, is a certificate or document that proves ownership of a share in a corporation. It is also called a security. When you buy a stock, you are purchasing a tiny sliver of ownership in a corporation. When the corporation makes a profit, it may choose to pay you, the shareholder, a percentage of that profit – call a dividend. There are two kinds of stocks, preferred stocks and common stocks. Common stocks allows you to have voting rights in the company’s leadership, while preferred stocks don’t let you vote but will pay you dividends before those who hold common stocks.
If you’re just beginning to invest and want to learn more about the various financial products that you can invest in – be sure to ask a financial expert who you can trust to lead the way. Also refer to the top 10 online brokerages to start your investments.