What Is A Stock?

Hey there. Another tutorial for my beginning stock market investing readers here who might need some help with the terminology. Today, I wanted to talk about what is a stock. Now I do want to point out that when I talk about the stock market and definitions that I am sure that they can be defined better. I define a stock as a piece of ownership in a company. Stocks are issued by companies to raise capital from investors. In return, each stockholder is given a tiny bit of ownership over the decisions of a company. So tiny, it probably doesn't matter, but ownership nonetheless. They also get the opportunity to share in the profits and losses of the company as well.

If the company is publicly traded, it will be listed on a stock exchange like the New York Stock Exchange or the NASDAQ. Trading activity is closely monitored and you can get stock quotes anytime that tell you at any given moment what the value of your stock is. Stock prices are determined by the supply and demand for the individual stock and may or may not reflect the true value of a company's stock at the time. Sometimes prices are artificially depressed and sometimes they are pumped up by news or the overall attitude in the market at the time. If the company is privately held, the stock price doesn't have a ready market of buyers and sellers. Therefore, it is not as liquid. Usually companies that are not traded publicly are closely held by a handful of owners who are not looking to sell there stock anyway and if they did, would sell it to another stockholder of the company.

As an owner of a share of stock in a company, you do have voting rights at the annual shareholders meeting. For the most part, shareholders do not go to these meetings, but instead vote by proxy on the decisions of the board. Meetings like were portrayed in the movie Wall Street where Michael Douglas give's his Greed is Good speech are an example of a shareholder's meeting.

Most people buy stocks through full service or discount brokers but they can be purchased directly from the companies that issue the stock as well.

Stocks can be very volatile and the returns from investing in stocks can be lucrative if you put the time and effort into studying the market and how it works. Diligent effort and consistent study and implementation of a specific strategy will yield results -- if you choose the right one.