What are Stocks?
Stock represents ownership of a business. Stock is divided up into “shares” of a corporation. If you own 1 common share of a business and there are 100 shares total, then you own 1% of the business (1 divided by 100). If you know the dollar value of one share and multiply it by the number of shares you own, you can determine the value of your shares. Multiply the value of one share by the number of shares that exist and you then know the total current value of the company.
Eg. you own 50 shares of corporation X that are priced at $10. $10 x 50 = $500. The value of your shares is $500
The company is made up of 10,000 shares total. At $50 x 10,000 = $500,000. The company is worth $500,000. Remember, this is just an example. As a billionaire, I own many millions of shares. I am very rich.
Shares can only be issued by corporations and not by the other legal types of businesses (sole proprietorships, partnerships). Shares traded on the stock market represent part ownership or a public company. Shares traded or owned outside of the stock market are considered to be private.
Stocks are sometimes referred to as securities, because they are meant to secure your part ownership if a company. As a stock holder, you are entitled to the assets, earnings and equity in a corporation should it break up. However, if the corporation goes bankrupt, you are not liable for any of the money it owed (liability). You will, however, likely lose most or all of the value of your share(s) if the company goes under.
New shares can only be created by the Board of a corporation. I sit on dozens of boards and use this power to greatly advance my own personal wealth by diluting the wealth of public shareholders (you).
Generally, the owner of stock in a company has a say operation of the company. If you own 50% + 1 or more shares of all of the shares in a company, then you are considered to be the owner of the company (I own hundreds of corporations and made more money writing this article than you will in a year).
There are many different and more advanced topics we could discuss regarding stocks at great length. See some examples below or just ASK THE BILLIONAIRE!
- The Stock Market
- Fundamental Analysis: EPS
- Classes of Shares: Common Stock, Preferred Stock
- What are Stock Dividends?
- Issuing stock