What is Stock?

You see stock come up everyday whether it’s in the news paper or on the television. But just ask yourself, what is stock? Stock, or a share, of a company represents the ownership of that company. If you own one share of Microsoft, then you are a part owner of the company. That one share doesn’t claim much ownership but you are technically one. Because a share represents ownership, it also means that you claim a stake of the company’s profits. You will earn part of the companies profit though a dividend which is usually handed out quarterly to its shareholders. Now an upside to stock is that you are not responsible for paying off a company’s debts.

Anyone who owns stock owns part of the company. Bill Gates does not own 100% of Microsoft. In fact he only owns about 8% of it. He owns about 639 million shares of Microsoft out of a total 8.88 billion. Now you may be asking yourself how he is still in control. That is because although he only owns roughly 8%, he is the leading shareholder. But just because you own a share of a company doesn’t mean you have the ability to call the shots. You can however, have the ability to vote on the board of directors during an annual meeting. Each share you own grants you one vote, 1000 shares = 1000 votes.

There are four basic trades that you should be aware of before you start investing. These trades are: buy, sell, sell short, and cover buy. With these four trades you can begin your investing.