WHAT IS A SHARE OF STOCK? STOCKS BASIC INFORMATION AND TUTORIALS

WHAT IS A SHARE OF STOCK ONCE AGAIN???

We’re not talking about livestock! Actually, the word stock originally did come from the word livestock. Instead of trading cows and sheep, however, we trade pieces of paper that represent ownership—shares— in a corporation.

You may also hear people refer to stocks as equities or securities. Most people just call them stocks, which means supply. (After all, the entire stock market is based on the economic theory of supply and demand.)

When you buy shares of stock in a corporation, you are commonly referred to as an investor or a shareholder. When you own a share of stock, you are sharing in the success of the business, and you actually become a part owner of the corporation.

When you buy a stock, you get one vote for each share of stock you own. The more shares you own, therefore, the more of the corporation you control.

Most shareholders own a tiny sliver of the corporation, with little control over how the corporation is run and no ability to boss anyone in the corporation around. You’d have to own millions of shares of stock to become a primary owner of a corporation whose stock is publicly traded.

In summary, a corporation issues shares of stock so that it can attract money. Investors are willing to buy stock in a corporation in order to receive the opportunity to sell the stock at a higher price.

If the corporation does well, the stock you own will probably go up in price, and you’ll make money. If the corporation does poorly, the stock you own will probably go down in price, and you’ll lose money (if you sell, that is).

WHY WE BUY STOCKS???

You Buy Stocks for Only One Reason: To Make Money

The stock market is all about making money. Quite simply, if you buy stock in a corporation that is doing well and making profits, then the stock you own should go up in price. (By the way, the profits you make from a stock are called capital gains, which are the difference between what you paid for a stock and what you sold it for. If you lose money, it is called a capital loss.)

You make money in the stock market by buying a stock at one price and selling it at a higher price. It’s that simple. There is no guarantee, of course, that you’ll make money. Even the stocks of good corporations can sometimes go down.

If you buy stocks in corporations that do well, you should be rewarded with a higher stock price. It doesn’t always work out that way, but that is the risk you take when you participate in the market.