Stock Market 101

What is a stock ?

A stock is a share in the ownership of a company. Once you have a share within a company you then take ownership of the company’s assets and earnings. The more stock you take within a company your equity becomes greater.

Stocks are also a limited liability. This means if the company is not able to pay their debts, you will not be be liable to fix this issue. There are companies that are in charge of this if this issue were to occur and they are known as partnerships. When you own a stock, you lose whatever you invest into it.

What is an IPO?

IPO (Initial Public Offering) –  According to investopedia an IPO is the first sale of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking the capital to expand, but can also be done by large privately owned companies looking to become publicly traded.

Risk in Stocks

There are risks in investing individual stocks. For all you people who are new to the stock market, NOTHING is guaranteed. Any stock can go bankrupt, so if you buy a share and that company goes bankrupt, then your stock is worth nothing.

Purchasing Stocks:

There are two ways for someone to purchase a stock and first way is to use a Brokerage Firm. For a full-service brokerage firm your pockets may hurt after, but you will be receiving quality advice from professionals to manage your account. For discount brokerage firms, you will not receive as much quality service but it is cheaper. So in the end, it all really comes down to how much you looking to spend.  Another way to purchase stocks are Dividend reinvestment plans and direct investment plans. These plans allow shareholders to purchase stock directly from the company, which for many can be more of an easier option.

For more information, please check out: http://www.investopedia.com/university/stocks/stocks1.asp