Whether or not you own stock, it is important to understand what it is and how people buy and sell it.
Let’s start with the basic idea of stock. The ownership of a corporation is divided into shares. Each share is a fraction of the ownership of the business.
Stock is the term for all the shares of ownership of a corporation.
Many different people own the shares of a corporation. They are called its stockholders. Owning stock in a company is also called having equity in the company.
The shares are assigned a certain value at the start of the company and can be provided to founders, purchased by investors or given to people in exchange for work for the company.
Publicly and privately held companies
Corporations can either be public or private.
Privately-held companies can control who buys their stock. These companies are usually smaller but include famous names like State Farm Insurance and the Mars candy company.
If I own a share, I can’t sell it without their permission, and they have control over the price the stock is traded for.
But a publicly-held company is different. Anyone can buy or sell their stock for whatever price the buyer and seller agree to. These are usually really large companies like Verizon and WalMart.
Buying and selling stock is called trading.
Public stock is bought and sold regularly. The price it has been sold for is publicly available, so you know what the current price is.
Stock in privately-held companies is priced by the company. It’s harder to know it’s true value, as the information is not public. But there are people who value privately-held companies as their job.
Stock is traded on a stock exchange. The largest one is the New York Stock Exchange. Billions of dollars worth of stock are traded there daily.
The collection of stocks held overall is called the stock market.
The concept of stock has existed for 2000 years or so, but it’s gone in and out of use.
What does stock represent?
How is it bought and sold?
Who controls the stock?