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Meaning / Definition of

Common Shares

Categories: Stocks,

Securities representing equity ownership in a corporation, providing voting rights, and entitling the holder to a share of the company's success throughdividends and/or capital appreciation. In the event of liquidation, common shareholders have rights to a company's assets only after bondholders, other debt holders, and preferred shareholders have been satisfied. Typically, common shareholders receive one vote per share to elect the company's board of directors (although the number of votes is not always directly proportional to the number of shares owned). The board of directors is the group of individuals that represents the owners of the corporation and oversees major decisions for the company. common shareholders also receive voting rights regarding other company matters such as stock splits and company objectives. In addition to voting rights, common shareholders sometimes enjoy what are called "preemptive rights". preemptive rights allow common shareholders>to maintain their proportional ownership in the company in the event that the company issues another offering of stock. This means that common shareholders with preemptive rights have the right but not the obligation to purchase as many new shares of the stock as it would take to maintain their proportional ownership in the company. also called junior equity or common stock.

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Definition / Meaning of

Passively Managed

Categories: Finance,

An index mutual fund or exchange traded fund is described as passively managed because the securities in its portfolio change only when the make-up of the index it tracks is changed. For example, a mutual fund that tracks the Standard & Poor's 500 Index buys and sells only when the S&P index committee announces which companies have been added to and dropped from the index.In contrast, when mutual funds are actively managed, their managers select investments with an eye to enabling the fund to achieve its investment objective and outperform its benchmark index. Their portfolios tend to change more frequently as a result. They also tend to have higher fees.The performance of passively managed indexed investments and their risk profiles tend to correspond closely to the asset class or subclass that the index tracks. They tend to be more popular in bull markets when their returns reflect the market strength and less popular in bear markets when active managers may provide stronger returns.

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