People often talk about investing in the stock market, discussing the Dow Jones, or bragging about owning shares of Google or Microsoft or Exxon. But what are stocks? While it is not necessary to have a complete understanding of every detail of stocks in order to invest in them, it is certainly helpful to have at least a basic understanding of them.
Put simply, a stock is a tiny piece of a company. When you own a share of stock in a company you own a small part of that company. For example, if you were to purchase 200 shares of Google, each of those shares represent one tiny piece of Google, and you would own 200 of those pieces. You are a part owner of Google.
The more shares you own the greater your ownership percentage of that company. At last check there are a little over 325 million shares of Google stock available for investing, so 200 shares is only a very tiny percentage (about 0.00006%). You would literally own that tiny percentage of all of Google's buildings, equipment, furniture, machinery - whatever they own.
Owning stock in a company benefits you in several ways. First, when the company earns profits you are entitled to some of those profits. These are paid out as dividends, either quarterly or annually.
Second, the stock price of companies may go up or down, but for productive companies they usually go up over time. On average the stock market has risen about 8% annually for the last 80 years or so.
Third, as an owner of the company you have the right/opportunity to participate in that' company's annual meeting and even vote in company elections!
Not every company is publicly traded (that is, has shares of stocks you can buy), but there are thousands that do, usually the biggest and most successful companies in the country.
To purchase shares of stock you need to have an account with a brokerage company. Such a company has direct access to the markets and can buy and sell shares of stock on your behalf. Another common way people invest in stocks is through mutual funds, which are a vehicle for thousands of people to pool their money together in order to invest in a large number of companies.
Either way, stocks are an excellent investment for anyone looking to expand their asset base and grow their net worth.
