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What is a Half Stock?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 02 April 2018
  • Copyright Protected:
    2003-2018
    Conjecture Corporation
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Half stock is any type of stock that is sold with a lower par value than the normal standard. Shares of this sock may be either common or preferred. Similar to any other stock option with the exception in the difference of par value, half stock has the same potential for growth and earning a return as other forms of stock.

In the United States, the nominal dollar value of a security issued by a specific company is normally set at $100 in US dollars. This is referred to as the usual standard. With a half stock, the par value is half of this standard, effectively creating a par value for that stock option of $50 USD.

It is important to understand the role of par value in determining the value of all types of common and preferred stock, including a half stock issue. When related to some type of equity security, the par value usually has no real bearing on the market price. There are exceptions, such as with shares of preferred stock, where the par value is utilized to calculate the amount of dividend payments to investors.

From an investment perspective, a half stock can be as just as profitable over the long term as stocks with a higher par value. Factors such as the performance of the company that issues the shares, the stability of the marketplace, and continuing interest in the goods or services produced by the company issuing the stock all play an important role in just how profitable the half stock becomes for an investor. As with any stock option, half stock can be adversely affected by sudden changes in the leadership of the issuing company, political changes that undermine confidence in the stock option, and even acts of nature that threaten the short-term or long-term viability of the issuing company.

Brokers can help interested investors identify stock issues of this type that are showing promise of increasing in value over time, as well as advise their clients of when to sell shares of half stock when the market indicates an impending downturn. It is not unusual for investors who focus on buying and selling shares of stock to include at least one or two half stock issues in their portfolios at any given time, buying and selling them at a pace that is likely to produce the best return. Stocks of this type can be traded in a market, or also in an over the counter strategy, depending on the preferences of the investor.

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