Intro to Stocks

By   September 1, 2015

What is a stock?

“Stocks” are the most basic part of investing; stocks are one of the most common tools used to invest in companies.stock


Stock is defined as a piece of a company; if you own a company’s stock, you actually own a part of the company itself (including its assets, like chairs, vehicles, and buildings). That does not mean that if you own $100 in shares you can go to the company headquarters and exchange it for a chair, but it does mean that if the company were to go bankrupt and all of its assets were liquidated, you may be entitled to receive some small percentage of whatever is left after all the creditors are paid.

What Does Owning Stock Get Me?

Since you own part of the company, you are now involved in some of its management decisions, and you are entitled to some of the company’s profits. What exactly you are entitled to depends on the amount of stock that you own. You also have the right to sell your stock at a later date at whatever price you want (although it is generally determined by the current market price).

Types Of Stock

There is more than one kind of stock as well; almost all stock sold on a stock exchange (and that you can readily buy) are “Common Stock”, but there also exists “Preferred Stock”.

Common Stock

Common stock is the kind you would buy through a stock broker or on your own. Common stock generally gives one vote for every share owned at shareholder meetings, but there are also some classes of “non-voting stock”. For large companies where a single, or even a thousand, shares does not give much of a voice when voting, the difference between the two is negligable.

Common stock holders may also be entitled to dividend payments, if the company makes them. Corporate profits (revenue minus expenses and investments) are usually issued back to shareholders as a dividend; some companies offer higher dividends specifically to attract more shareholders. If you receive a dividend, and how much, varies widely by company. There can also be multiple classes of common stock.

Preferred Stock


The Difference Between Stock and Bonds

When you buy a stock, you are buying a piece of a company. A bond, however, is only a piece of debt; a bond is a promise that a company makes to pay you back an amount you lend them, plus interest. Hence, if you own a bond, you are only lending a company money, but if you own a stock, you own part of the company itself.

Bonds also pay interest based on the company and how much you bought the bond for, while stocks’ value is determined only by the “market value”; how much other investors are willing to pay to own part of that company.

Where Does Stock Come From?


New Issues (IPO)

A new issue of stock is when a private company decides to “Go Public”, and issues shares of stock for anyone to buy. This is often called an IPO, and when large private companies go public, it can be a very exciting event with huge fluxuations in the stock’s price in the first weeks while the market decides on a fair price for the shares.


Stock Dividends (Splits)




Attract Attention and Increase Trading


Lower The Price


History Of Stocks




Wall Street in the United States was formed by groups of investors that would meet near a buttonwood tree on Wall Street in New York City to buy and sell shares of stock they owned in these Joint Stock Corporations, and the financial center of North America grew from there!

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