Definition: The shares of a particular company or corporation.
What is a stock market? What is it actually for? How did it come about? Below is a brief introduction what are stocks and what is it all about.
Buying and selling shares is a form of investment. After purchasing some shares, it will mean that you would have owned a small percentage of a listed company in a particular country.
To do so, you would have to reach a certain legal age as deemed fit by the country you are in. Each share will have its value and the value ranges differently every single working day. An individual may have voting rights in the company should the company make such allowance and if the individual own enough shares. By selling and buying stocks at different times whether in a year or a month or a day, one could either earn a sum of money or lose a sum of money.
What are stocks?
Stocks are shares. To explain it further, let me state you the following example using very layman language. Presuming you own a company, that is worth $10,000. You wish to share the company with others. The process of dividing up your company is also known as IPO (Initial Public Offering).
Hence, you divide the company equally into 10 parts or shares. Thus, each share is worth $1,000. Each person that buys 1 share of the company will now have to pay $1,000 for it and he therefore owns one-tenth of the company now. He will now also have one-tenth of the votes for decision making in the company. Profits that are earned by the company will also be split into 10 portions and one-tenth of the portion is also given to the person. This is also known as dividend and will be explained later.
What is a stock market?
There are many such companies out there in the world. Many which of them wanting to go IPO too or has already went IPO. Hence, the stock market or the stock exchange is a place for the public to buy and sell shares. The stock market can be viewed as a common supermarket that contains all the stocks for people to buy or sell. If there wasn’t a stock market, people will be looking for buyers or sellers manually, putting up ads for this purpose.
What are stocks for?
Stocks are issued when a company wishes to raise capital from public investors. The money is then used for specific purposes, such as the research and development of new products, building new plants, acquiring new equipment, increasing production, or improving and developing new product distribution and sales system.