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Basic Stock Investing 1: What is a stock?

When a private company decides that it needs more capital for whatever reason, it may decide that the best way to raise this capital is through selling stock. This process of going public and selling shares is called an IPO or initial public offering. When an investor buys shares of stock that are being sold in an IPO the money that he spends buying the shares goes directly to the company which then can use it to fuel growth. In return for this capital contribution the investor is given partial ownership of the company. If a company issues 10,000 shares of stock in its IPO and you buy 1,000 shares of it, then you have a 10% ownership in the corporation. As an owner you are entitled to part of the corporation’s earnings, which are usually paid out by the company to its shareholders through dividends. Typically a company will only pay a portion of the earnings as dividends and then reinvests the rest to help the company grow. Most of the time you do not buy stock directly from the company but instead you buy it from another shareholder who for whatever reason has decided to sell his/her share of the company. Stocks are bought and sold on stock exchanges which help to bring buyers and sellers together. Stocks have a market value attached to them which is the price that it can be bought or sold for at that time. The market value of a stock is controlled by the laws of supply and demand. If demand goes up and more people what ownership in the company then an investor will be able to sell his shares at a higher price.
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my blog said…
since I am from commerce background,I have a good knowledge about stock and your post worked like a revision on this topic for me.




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July 31, 2008 at 10:07 PM
Unknown said…
Nice post mate, keep up the great work, just shared this with my friendz go to website

November 27, 2016 at 2:10 AM
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