What is a Stock?
The easiest answer to this is a piece of the company’s ownership. It can be teeny tiny part or relatively big depending on your investment criteria.
For instance, you’ve always wanted to own a McDonald’s store, but can’t afford to get the real deal. You certainly can afford to buy 10, 100, 1000 shares. You might not be doing the frying, but you do have a say in the corporate aspect of it. You are technically part owner and can participate in the shareholders meetings as well.
There are two ways to buy stocks:
1. IPO – initial public offering. This is when the company first goes public. Not always is getting in on this level is as great as some people believe they are. For one thing, you have to have a certain amount to enter – sometimes up to several million $. And there have been times that the IPO price was way overvalued and after the IPO period was over the prices fell down. This is done only on the primary market.
2. Open market – Secondary market. Once the company goes through the IPO and it’s complete it goes to the secondary market where it’s life continues to thrive through active buying and selling. This is how most investors work with stocks.
Once it’s on the secondary market you can trade on one of these stock market exchanges:
- New York Stock Exchange (NYSE)
- American Stock Exchange (AMEX)
- National Association of Securities Dealers Automated Quotations (NASDAQ)