Introduction to the Stock Market

STOCKS Stocks are a share of ownership in a company. When you own something, you can enjoy the benefits of what you own. One benefit of owning stock in a company is that you are entitled to receive some of the profits that company makes. However, when you invest in the stock market, you take a big risk, which is the chance of losing money.

Ownership You can become a part owner of a company if you buy stock in that company. But the many other people will also have bought stock in that company. So you are then only one of many people who share its ownership. That is why when you buy a stock in a company, you buy something called shares.

Shares When you buy shares of stock in a company, you own a little piece of every part of the company. Therefore, if you bought stock in McDonald’s, you would not only own 1/694 millionth of every hamburger, you would also own 1/694 millionth of the company’s buildings, equipment and raw materials.

Shares Each share of stock you own entitles you to one vote for the company’s top managers, or directors. These managers run the company for you, so you do not have a big influence on what the company does or sells. Why would a company want to join the stock market in the first place? What would be the advantages of selling shares of ownership in a company?

Use of Stock Revenue When a company sells stock it takes more revenue than it would have had it not sold shares of stock. The company can then put that money back into improving the business by building more restaurants improving its equipment or creating and selling new products.