What the stock!?

Nothing here is a textbook definition or widely accepted explanation. This is just for fundamental understanding purposes.

Stock is a piece of ownership you can buy of a company. Imagine it as a piece of the jigsaw puzzle that can be bought for some price. Whoever holds the pieces are the owner/shareholder of that company.

Why sell ownership?

Let’s say you hold a big apple business, you need a lot of money to set up stores, staff, furniture, and a lot more misc. Either we can get a loan from a bank with a too high-interest rate (or) dilute ownership by allowing others to own a piece of your business (i.e) shares. A loan requires one to pay interest at regular intervals and is not always a feasible option for a business to take a loan.

Where can we sell ownership?

As the general public can invest in any small to large-scale companies today to buy pieces of the ownership (shares), we have stock exchanges to regulate and manage this market. Every nation has its own stock exchange like NYSE in the USA, and BSE in India.

Generally, the firms who want to sell their ownership decide their dilution percentage (in India, you should be diluting around 25% of ownership to the public/stocks). Then the price for each stock (the opening price at the stock market for the general public to buy) is decided. This is called an “Initial Public Offering (IPO)”.

Where can we buy ownership?

Previously, there used to be human brokers working in this stock exchange to take orders by phone to buy shares. As tech advances, people are replaced with software. Today, there are many stock brokering apps available like Robinhood, We Bull, E-Trade, and Fidelity. These stock brokering apps buy your requested stock from exchanges and help you manage your portfolio.

Interested to buy, but what to buy?

Figure out, what company or firm you are interested to buy the ownership (or stocks from). Evaluate the company culture, goals, and long-term vision. Also, look at these articles for more info on how to evaluate the financial metrics of a company/stock and What about ETFs?

Peace!