Choosing Between Securities

by David Jenyns on January 29, 2008

Buying corporation securities is somewhat like buying an automobile. The basic, one-celled form of business life is the individual entrepreneur \emdash the store owner who merchandises goods, the artisan supplying services, the small manufacturer \emdash whose capital needs are met out of savings or through a modest bank loan.

As long as firms remain relatively small, either type of organization is adequate. Enlargement of the partnership is no answer. Outside investors willing to take on the mutual responsibilities of partnership, or to immobilize their funds in a partnership agreement, are hard to come by.

Ownership there\lang0\f1\endash\lang1033\f0 by is spread among as many hundreds or thousands of people as are willing to buy in, their proportional part of the firm being represented by the amount of stock\emdash or number of shares\emdash they hold.

Owning securities in a corporation can be an exhilirating (and equally devastating) prospect. It’s important to know what you’re getting into before buying stock in a publicly owned company, and to hold onto it long enough to allow it to mature.

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