What is a Stock?

A stock represents the value of a company. An individual share of a stock represents a percentage ownership of the company. As the stock goes up or down the value of the company goes up or down. 

How are stocks bought and sold?

Stocks are bought and sold on stock exchanges, like the Nasdaq or New York Stock Exchange. You will hear about these on the news a lot. Companies list their stocks on these exchanges for people to buy and sell them.

How do individuals trade and invest in stocks?

Most individuals trade and invest, (buy and sell) stocks using what is called a brokerage account. There are many brokerage accounts and most are very similar. You have to open an account, provide proof of identity and send funds to trade. Of course there are other rules that you have to follow when you trade that each brokerage account will inform you about.

Do all Companies have stocks?

No. Many companies do not have stocks. If a company has a stock associated with it, it means it is a ‘public’ company. It means it is required to disclose lots of financial information to the public and individual people and large institutions can trade and invest in the stock.

Many companies are ‘Private’, and do not have any stock associated with it and most individuals cannot invest in them. Think of your local small businesses, these are usually small privately owned companies. Of course there are also large privately owned companies.

Why do companies issue stocks for people to invest?

There can be lots of different reasons. Of course the vast majority of companies were once small, private companies. Eventually they realized they were growing and needed extra money to open new stores, or build new products, and when a company offers a part of their company for sale by selling stocks, they can use that money to invest in the company and help their company grow more.  

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