What Is A Stock?

It seems people everywhere are often talking about buying stocks, and putting their opinions on stock ownership, but many individuals we meet have questions about what stocks are, and how stocks work. Today we will answer some of these questions.

Stocks, also commonly referred to as "equities", are shares of ownership in a company. Companies will often issue stock as a way to raise capital for business expansion. This is usually first done using what is called an initial public offering, or "IPO". Once shares of the company's stock are offered on the market, investors can purchase the stock which can provide some ownership benefits to the investor. One of these benefits is voting rights within the company. Voting rights gives the shareholders a vote on some decisions within the company such as the company's board of directors. Another benefit could be dividends. Dividends are payments which some stocks may provide to shareholders which provides periodic payments to the shareholder from the company's profits. The other financial benefit that is possible from stock ownership is the stock appreciating in value from the investor's purchasing price. If the company continues to grow and increase in value, then the stock's value has the potential to also increase in value. The investor can then sell their share of stock in the company at a profit. The inverse though is also true. There is always risk when purchasing stock that the value of the stock could decline and the investor might end up selling the shares for a loss and could lose money.

If you have questions about stocks, or other investments, we would be happy to answer your questions. You can schedule a 15-minute phone call with one of our financial professionals today to learn more about stocks and investing.