By: Pink Ladies Lexi Solway & Emma Berk What is a Stock? By: Pink Ladies Lexi Solway & Emma Berk

What is a Stock?… A stock is a certificate that shows that you own a small fraction of a corporation. When you buy a stock, you are paying for a small percentage of everything that that company owns, buildings, chairs, computers, etc. If you buy 100 shares of McDonalds stock that means you own a percentage of McDonalds! When you own a stock, you are referred to as a shareholder or a stockholder. A stock is a representation of the amount of a company that you own. You take the total number of shares a company has issued to determine your exact percentage of ownership.

The Potential Benefits The benefit of owning stock in a corporation is, whenever the corporation profits, you profit as well. For example, if you buy a stock in Juicy Couture, and they come out with a new jacket that everyone buys in massive quantities, then the company will profit tremendously, and so will you. A stock also gives you the right to make decisions that may influence the company. Each stock you own has a little bit of voting power, so the more stocks you own, the more decision making power you have. But, In order to vote, you must either attend a corporate meeting, or fill out a proxy ballot. A proxy ballot is a "substitute" for your absence at the corporate meeting. A ballot is a series of proposals that you may either vote for or against. Also, if you think that issuing additional stock may increase the value of the stock, then you would vote for issuing additional stock.

The Potential Disadvantages The main disadvantage of common stock is that in case the company needs to be liquidated, they won't see a cent of their money after the bondholders, other debt holders, and preferred stock owners have received their part. They are not guaranteed to return anything to the investor while the coupon payments and principal of bonds are. Thus, the possibility for high returns is greater with stocks but so is the possibility of losing money. You have to pay interest to your broker for borrowing the money. If the deal goes bad, then you have to come up with even MORE money than you have in the value of the stock to pay back the broker.

Things To Consider in Buying a Successful Company Stock? How much profit has the company made recently? If the company has not recently made a lot of profit, chances are it may never profit, and it is not a good idea to invest in it. If the company has made a lot of profit recently, then it may be a good investment, since the profit may continue to rise. Is the product or service provided popular and in demand? If the company offers an undesirable product, then the company may fail, since no one will buy from them. If the company dies, then you suffer massive losses, so you do not want to invest in companies with an undesirable product or service. You want to invest in a company with a service or product that is in high demand. Is there a lot of close competition? If the company is the only company that offers something, then everyone has to buy from that company, meaning the company will grow larger, and profit a lot. For example, if there was a company called Sneakiness and it was the only company to offer sneakers, then everyone would be forced to buy from them, and that would result in huge profits for Sneakiness.

The End! I hope you enjoyed it 