What Is A Stock?
The Definition of a Stock Plain and simple, stock is a share in the
ownership of a company. Stock represents a claim on the company's
assets and earnings. As you acquire more stock, your ownership stake
in the company becomes greater. Whether you say shares, equity, or
stock, it all means the same thing
Holding a company's stock means that you are one of the many owners
(shareholders) of a company, and, as such, you have a claim (albeit
usually very small) to everything the company owns. Yes, this means
that technically you own a tiny sliver of every piece of furniture,
every trademark, and every contract of the company. As an owner, you
are entitled to your share of the company's earnings as well as any
voting rights attached to the stock.
A stock is represented
by a stock certificate. This is a fancy piece of paper that is proof
of your ownership. In today's computer age, you won't actually get
to see this document because your brokerage keeps these records
electronically, which is also known as holding shares "in
street name." This is done to make the shares easier to trade.
In the past when a person wanted to sell his or her shares, that
person physically took the certificates down to the brokerage. Now,
trading with a click of the mouse or a phone call makes life easier
Stock Trading Basics
Wouldn't you love to be a business owner without ever having
to show up at work? Imagine if you could sit back, watch your
company grow, and collect the dividend checks as the money rolls in!
This situation might sound like a pipe dream, but it's closer to
reality than you might think.
As you've probably
guessed, we're talking about owning stocks. This fabulous category
of financial instruments is, without a doubt, one of the greatest
tools ever invented for building wealth. Stocks are a part, if not
the cornerstone, of nearly any investment portfolio. When you start
on your road to financial freedom, you need to have a solid
understanding of stocks and how they trade on the stock market.
Over the last few
decades, the average person's interest in the stock market has grown
exponentially. What was once a toy of the rich has now turned into
the vehicle of choice for growing wealth. This demand coupled with
advances in trading technology has opened up the markets so that
now, nearly anybody can own stocks.
popularity, however, most people don't fully understand stocks. Much
is learned from conversations around the water cooler with others
who also don't know what they're talking about. Chances are you've
already heard people say things like, "George’s cousin made a
killing in XYZ company, and now he's got another hot tip..." or
"Watch out with stocks. You can lose your shirt in a matter of
days!" So much of this misinformation is based on a
get-rich-quick mentality, which was especially prevalent during the
amazing dotcom market in the late 90s. People thought that stocks
were the magic answer to instant wealth with no risk. The ensuing
dotcom crash proved that this is not the case. Stocks can (and do)
create massive amounts of wealth, but they aren't without risks. The
only solution to this is education. The key to protecting yourself
in the stock market is to understand where you are putting your
money. It is for this reason that we've created this tutorial:
to provide the foundation you need to make investment decisions
yourself. We'll start by explaining what a stock is and the
different types of stock, and then we'll talk about how they are
traded, what causes prices to change, how you buy stocks, and much
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