Even if you’re new to trading, there is a good chance that you have heard of Stocks or Shares. Stockbrokers have been depicted in movies for decades, from “Trading Places” to “The Wolf of Wall Street”, so it’s no surprise that the average person is at least somewhat familiar with the concept of Stocks. For a more in-depth look at what Shares are, and how the Stock Market functions, allow me to elaborate.
A Stock or Share is a type of financial asset, that represents a portion of ownership in a corporation. More specifically, a Share entitles Stockholders to a portion of a company’s profits or losses. Stocks are almost always the foundation of an investors portfolio, as historically they have outperformed many other investments.
A corporation will sell Shares of their company in order to raise funds that will be used to operate or expand their business. An investor will then buy Stock, entitling them to a proportionate amount of the assets of said corporation. The portion of the corporation’s profits or losses that each shareholder is entitled to is based on the amount of Stocks that are owned. For example, if a company has made 100 Shares available, and an investor purchases 5 Shares, they own 5% of the company.
For clarification, it is important to note that a Shareholder does not in fact own a corporation, they own Shares that are issued by the particular corporation. This means that a corporation is able to own assets such as property that is held separately from the Shareholders. However, owning Stock in a company gives an investor the right to receive dividends (share of the corporation’s profits) as well as the ability to vote in Shareholder meetings.
Shares are most commonly traded on Stock Exchanges. There are more than 60 Stock Markets worldwide, with some of the biggest being in New York, Tokyo, Hong Kong, and London. Due to the different time zones, it is possible to trade on various Stock Markets 23 hours a day, 5 days a week. It is also possible to trade after hours on some Exchanges, however, the hours vary based on location.
To sum up, a Stock is a share of a company’s net revenue that is issued by the corporation. The more shares an investor owns, the larger the portion of profits or losses there will be.