What Is a Stock?
A corporation can raise funds by selling part of its ownership in the form of shares. Multiple shares of a corporation is known as a corporation’s stock. Most times stock, shares, or equity all mean the same thing, which is a claim on the company's assets and earnings.
For example, if ABC Corporation has 1,000,000 shares and you own 500 of them, then you own 0.5% of ABC Corporation.
Where Is Stock Traded?
When a company publicly raise funds, it issues stock through an initial public offering (IPO) in the primary market. The price of the stock is based on an estimate of the company’s worth and how many shares are being issued. After the IPO, traders and investors continue to buy and sell the stocks of the company in the secondary stock market, such as the New York Stock Exchange, London Stock Exchange Group, and Toronto Stock Exchange.
Why Invest in the Stock Market?
- To sell it at higher price: Investors purchase stock hoping that as the company grows, the value of their purchased shares will also grow.
- To get regular income: Some corporations offer dividends. Dividend is money paid regularly (typically quarterly) by a corporation to its shareholders, and depends upon the profits they make during the same time period.
- To get a long-term return: History shows that investing in the stock market offers the opportunity to generate superior return over long period of time. However, such stock market value is subject to fluctuation depending on the condition of the economy and the state of the company itself, so manage your risk.
How to Invest in Stocks?
Experts recommend investors buy mutual funds or ETFs that contain small portions of various stocks instead of whole individual stocks. Stock investing requires in-depth research, technical skill sets and a willingness to take higher risks due to its price fluctuations. If you still want to try, research successful strategies, such as a dividend stock investing strategy.