Home Finance A Guide to Stock Certificates: What You Need to Know

A Guide to Stock Certificates: What You Need to Know

14 min read
A Guide to Stock Certificates: What You Need to Know

Making money is important to virtually everyone. We all know the traditional hard work and effort method to achieve the cash necessary for daily life. But investing in the future can be a different philosophy altogether. That’s where stock certificates come in, keep reading to learn more.

Stock Certificates

You have probably heard the term “stock” before. Understanding a stock certificate definition may be helpful for you in order to acquire wealth down the road. So what is a stock certificate?

Also known as a “share certificate”, a stock represents partial ownership in a publicly traded company. When a company “goes public” it offers pieces of itself for purchasing by the average person in hopes of raising money or perhaps expanding.

Anyone who purchases a piece of the company the receives stock shares. This entitles the holder of the stock certificate to applicable shareholder rights and receiving part of the profits of the company.

History of Stock Certificates

Proof of stock ownership was accomplished by issuing pieces of paper to a buyer. Traditionally, these stock certificates were decorated and ornately made. Many of them were like works of art.

More than just looking impressive, stock certificates were also included important details to ensure each was unique and very difficult to fraudulently replicate. Important information included the date the certificate was issued, an individual identification number, and typically a complicated design.

Stock certificates would also likely include corporate seals, watermarks, and various signatures. Not only was the final product elegant, but it helped to prevent forgery of the certificate.

These certificates were necessary to prove entitlement to company dividends, sometimes requiring receipts to be signed by stockholder as well as the company. Today, in order to streamline the payment of these profits to the rightful shareholder, a person does not need to provide their original stock certificate.

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This is because much of modern trading takes place instantly using digital technology.

Modern Stock Trading

Today, physical paper stocks are largely a thing of the past. Outdated are the days of large sheets of stocks in a filing cabinet or desk drawer. Today’s stock trader almost exclusively deals with digital stocks.

Paperless stocks, now referred to as “book-entry” securities, are never physically transferred or traded. Instead, all transactions are recorded digitally by the financial institutions that deal with them.

This eliminates the need for paper form stock certificates which, in today’s fast-paced trading markets, are impractical for modern exchange.

Still, some prefer the traditional feel and experience of paper stock certificates. Luckily, companies are legally obligated to issue physical stock if requested. While most companies prefer not to print and distribute stock certificates due to the extra administrative work entailed (printing, mailing, etc.) if requested a company will send you a paper stock certificate.

It is important to note that a stockholder can have either a digital stock or the paper stock certificate, not both.

Getting Your Stock Certificate

To obtain your stock certificate, you can pursue one of the following options:

1. Ask your broker. Your stock broker or financial stock institution can do the legwork for you. Though it might cost a small fee, your broker is well situated to contact the business you own stock in and request the paper form. They’re the experts, after all.

2. Contact the business directly. Don’t want to go through your broker? You can use the Secretary of State website once you know what state the business operates in. From there you can contact the appropriate department to request your material stock certificate.

3. Order through a transfer agent. A transfer agent is typically a bank or similar trust company that is responsible for tracking what persons or financial bodies trade and hold stocks. Acting as an intermediary between a company and the purchaser of a stock, transfer agents handle a lot of company responsibility on behalf of the public business.

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Managing Your Stocks

With physical stocks too cumbersome and timely to trade practically, modern trading has moved online.

You have a lot of options when it comes to keeping track of and managing your stocks. A stockbroker “brokers” deals on your behalf. Their professional knowledge and insight on market trends make them an option to strongly consider for the various fees they charge.

Opening a brokerage account and working with a broker could be a great first step toward maximizing your returns. Deposit funds into your account, authorize trades made, and let your broker do the rest. Just be sure to consider their advice before making any large financial decisions.

Many stock owners are now opting to use electronic brokers to manage their financial assets due to the ease of being able to access your portfolio whenever and wherever you are. For the same reasons stock certificates have become antiquated, electronic stock portfolios have become a financial mainstay.

Stock Understanding

Whatever your financial decisions are; paper or digital, brokerage or DIY, it pays to know what to expect.

Since we all want to get more out of our initial investment, understanding how to realize your capital gains and the inherent tax rates is very important. Navigating the stock market is no easy feat, after all. If it was… then everyone would do it!

Don’t let that deter you, however. With your new knowledge of stock certificates and what stocks are, you can venture into the market and make the most of your investments! Be sure to check back in for future tips and insight.

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