If you don’t like pizza we can’t be friends. And if you do, don’t expect me to share. Luckily for you, there are loads of people who are willing to share. In fact, sharing is often a necessary part of growth and expansion for a company or organization.
By offering up and selling parts of its ownership, a company is able to use money generated from the sale of those parts to do more, make more, and be more than what it is. As the name suggests, those parts that are up for grabs (at a price), are called shares. Or stocks. Or equities. Potayto, potato.
Owning shares in a company also means you have a special relationship with the company that other people don’t have. You even have a say in how it’s run because you can vote on certain company decisions, attend shareholder meetings, and more.
When you own shares in a company, you also have the opportunity to make money! Here’s how:
- First, the value of your ownership stake can go up. Let’s say you buy 1 share of your favorite company’s stock for $10. The company grows and becomes more valuable. That 1 share is now worth $15, you could sell it to make a $5 profit. Or, you could hold onto it, thinking it might go up even higher. (Of course, it could go down. If you sell that share at $5, you’d lose $5 from your initial investment)
- Second, with some stocks, you’re able to earn dividends too. Dividends are company profits that some companies distribute to their shareholders. This is cash you get just for being a shareholder!
Share lingo for you to start using:
Stock Exchange - Stocks, shares, or equities have a specific place where they are bought; it's called the stock exchange – The world's largest stock exchange is the New York Stock Exchange (NYSE), where American stocks are bought and sold.
Returns – The money you make (profit) or lose (loss) on an investment. Returns are often shown as a percentage.
Dividends - Cash the company gives to its shareholders when it makes money. The cash shows up in your brokerage account automatically. Dividends aren’t a given – a company can decide to lower or cancel dividends if times are tough. Sometimes, companies issue stock dividends instead. In that case, you end up with additional stock in the company.
