Personal Finance & Money Stack Exchange is a question and answer site for people who want to be financially literate. It only takes a minute to sign up.
Sign up to join this community
I want to enter the stock market, but I still have some questions that I want to ask before I start.
If I bought 1 percent share of company X, but unfortunately it closed down because of some reason as it was 1 million dollars in debt. Since I had 1 percent of its shares, does it mean I also have to pay the 1 percent of its debt?
Is there an age requirements to enter the stock market? I am 15 years old this year.
First, welcome to Money.SE. If you are interested in saving and investing, this is a great site to visit. Please take the tour and just start to read the questions you find interesting.
1 - even though this is hypothetical, it scales down to an average investor. If I own 1000 shares of the 1 billion, am I liable if the company goes under? No. Stocks don't work that way. If all I have is shares, not a short position, not options, I can only see my investment go to zero.
2 - Here, I'd ask that you edit your country in the tags. I can tell you that my newborn (who is soon turning 17) had a stock account in her name when she was a few months old. It's still a custodian account, meaning an adult has to manage it, and depending on the state within the US, the age that it's hers with no adult, is either 18 or 21. Your country may have similar regional rules.
Also - each country has accounts specifically geared toward retirement, with different favorable rules regarding taxation. In the US, we have accounts that can be funded at any age, so long as there's earned income. My daughter started one of these accounts when she started baby sitting at age 12. She will have more in her account by the time she graduates college than the average retiree does. It's good for her, and awful for the general population that this is the case.
In the US, and I suspect in most of the developed world, one major point of a corporation is limited liability. The stockholders are not on the hook for liabilities beyond their investment. If the company does something terrible, or fails economically, it goes bankrupt. Usually the stockholders have their investment wiped out, but they are guaranteed that they do not have to pay more in to any settlement.
1st question: If I bought 1 percent share of company X, but unfortunately it closed down because of some reason as it was 1 million in debt. Since I had 1 percent of it shares, does it mean I also have to pay the 1 percent of it's debt?
Stock holders are not liable for anything more than their current holdings. In cases of Ch11 bankruptcy stock holders usually get nothing. In Ch7 the holdings will be severely hit but one may get 10% of pre-bk prices. I would strongly recommend against investing in bankrupt companies. A seasoned trader can make plenty off short term trades.
The payoff structure is usually:
2nd question: Is there an age requirements to enter the stock market? I am 15 years old this year.
Yes it is generally 18, but some firms offer a joint option that your parents can open.
If I bought 1 percent share of company X,
Most countries company X, is treated as a separate legal entity than individual. So max loss is what you have invested. However certain types of companies, generally called partnerships are not separate entities and you have to pay back the said loss. However such companies are not traded on stock exchanges.
Is there an age requirements to enter the stock market?
Depends on country. Generally a minor can hold an account with a guardian.
