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What Exactly is Stock?

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  • Written By: Diane Goettel
  • Edited By: Bronwyn Harris
  • Last Modified Date: 02 April 2018
  • Copyright Protected:
    2003-2018
    Conjecture Corporation
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In the world of finance, stock is an expression of the capital funds that have been raised by a company or corporation. Furthermore, it is what makes up the shares of the company or corporation that can be traded on the stock market exchange. A person or group that holds a share of stocks is considered to be a shareholder. It is important to note that shares often split. Therefore, a shareholder might actually only hold part of a share.

The overall worth of a company is decided by the value of its shares and, hence, the stock that the shares hold. Because the market changes every day, the value changes every day. Depending on the market and the type of the stock, its value may change dramatically on a daily basis, or only fluctuate slightly.

Although there are markets all over the world, it is important to know that the words “stock” and “share” are used to define different things. The differing definitions are very important for international business people, and individuals buying stock in international businesses, to understand. In South Africa, Australia, and the UK, the term “share” is used in the same way that it is used in the United States. A “stock,” however, is not considered to be what exists within a share. Rather, in these markets, the term is applied to what financial institutions in the United States refer to as “bonds.”

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There are a number of different kinds of stock in the financial market. Common stock, for instance, is simply that which is sold in shares on the market. If this type is purchased back from the shareholder by the company or corporation that it belongs to, it is then considered to be “treasury stock.” Treasury stock is used in a number of ways within a company. Other types include preferred, dual class, and golden share. These types generally are distinguished by the power and rights that the shareholders retain as the owners of the stock.

Depending on the type and amount of stock that a shareholder owns, he or she might be able to vote on decisions being made within the company. Furthermore, the type may indicate a right to specific types of dividends. If you are just getting started in the stock market, you will likely deal mainly with common stocks. As your experience and profile matures, you may be interested in purchasing other types.

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Discuss this Article

andee
Post 4

I took a stock investments class in college and found myself wanting to know about the stock market. I was a very poor college student and didn't have much money, but somehow wanted to begin investing.

I started out with a dividend reinvestment plan program because this was all I could afford. A small amount of money each month was set aside for this and I slowly began accumulating shares of stock.

While this was a slow way to get started, it was all I could afford, but it also gave me the chance to learn what I was doing. I know some people who get excited about the stock market but have no clue what they are

getting in to.

They might make some profits in the beginning, but not every trade is a winner, and it doesn't take long to lose all your money if you don't understand the process.

I still receive dividends on some of the stocks I began purchasing when I was in college many years ago.

John57
Post 3

I first began buying some stocks a few years ago. At first I was pretty nervous when I purchased my first few shares, but have now become more familiar with the process.

I use an online stock broker when I purchase stock and have only invested in common stock. Every once in awhile I receive an email from my broker telling me I can vote on something with the company I am invested in.

I usually don't own very many shares, so figure my vote won't make much difference one way or another. You aren't required to vote, but have the option to do so if you want to.

I find that stock investing is not as intimidating as I first thought it was. The more I learn and educate myself about a particular company, the more interested I am in buying shares of stock in that company.

golf07
Post 2

The very first shares of stock I bought for my son were shares of Disney. We had spent more than one vacation there, and my son loved everything about Disney.

I thought this would be a great way to introduce him to the stock market. Even though I did most of my trading online, I requested to receive the actual stock certificate so I could show my son.

The certificate had some Disney characters stamped on there with the number of shares that were represented. Then we went online and researched the stock information on the company.

I think it was nice for him to have a visual of what owning some shares of Disney stock actually

looked like. It is much easier to get kids interested in stocks if they are familiar with the company.

I think it makes it easier for them to understand and follow what is going on, and how certain economic and news events can affect the stock price.

SarahSon
Post 1

My dad is the one who introduced me to the stock market. He has invested in stocks for many years and used to rely on the daily newspaper to get his stock quotes.

When he would buy shares of a stock, he would also physically receive the shares of stock on a piece of paper. He would keep these in a lock box until he was ready to sell the stock. Then he would take these to his broker who would send them in and sell his shares for him.

The internet has made this so much easier. There are dozens of sites where you can do your own stock research for free. You can get a stock price quote at any time of the day.

Most trading is also done online now, and with electronic trading, you don't physically receive the shares of the stock unless you request them.

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