Introduction to Stocks

Suraj Gautam
Staff Writer

When people talk about buying stocks, they are talking about owning a small piece of a company. A stock represents ownership in a business. When you buy one share of stock, you become a shareholder, which means you now own part of that company. Even though it might be a very small percentage, you still have a claim to a portion of its value. 

Companies sell stocks to raise money. Instead of borrowing from a bank, they allow the public to invest in them. People buy stocks because they believe the company will grow in the future. If the company becomes more successful, the value of its stock usually increases. Investors can then sell their shares for more than they paid, making a profit. Some companies also pay dividends, which are small payments given to shareholders as a reward for investing. 

There are two main types of stocks: common stock and preferred stock. Common stock is the type most people buy. It usually gives shareholders voting rights, which means they can vote on certain company decisions. However, dividends are not guaranteed. Preferred stock is different. It usually does not come with voting rights, but it does give shareholders more consistent dividend payments and priority over common shareholders if the company runs into financial trouble. 

Stocks can also be grouped based on the size and type of company. Large companies like Apple or Amazon are considered large-cap stocks and are generally more stable. Smaller companies are called small-cap stocks, and while they can grow faster, they also come with more risk. There are also growth stocks, which are expected to increase quickly, and value stocks, which are seen as undervalued and may increase over time. 

Investing in stocks can be a way for people to grow their money, but it is not guaranteed. Stock prices change constantly based on company performance and the overall economy. Because of this, it is important to understand the basics before investing. Learning about stocks helps people make smarter financial decisions and better understand how businesses and the economy work. 

Contact Suraj @ suraj.gautam@student.shu.edu