What is a stock?

What is a stock?

A share is a security representing an interest in a company.  A share is a participation in a company. A company sells a part of its company shares on the stock market to raise money for the company.

What characterizes a share?

• A share is a security that reflects a stake in a company.
• The shares of a company that can be traded on the stock exchange are called "outstanding shares". The picture is an example of a company that holds 64% of all shares published on the stock exchange.
• Anyone can buy and sell shares on the stock market.
• Shareholders are eligible to receive dividends paid by the Company.

Companies can issue new shares when additional cash is needed. The issuing of new shares is often rated negatively and, depending on the amount of shares issued, leads to falling share prices.

Companies can buy back shares if they have additional cash. This process is a positive signal and is rewarded with rising share prices.

How to make money in stocks?

There are two ways to make money in stocks.

• The share price rises higher than the buy price. If stocks can be sold at a higher price than they were bought, they have made a profit. If you want to know what moves a stock price, you will find information here (What moves the market?).
• Dividend payments. When a company pays dividends, share owners are entitled to receive these dividends.

Summary

Shares are participations in companies. Companies can distribute corporate profits to their shareholders in the form of dividends.

Profits and losses can be generated with the price development of the shares.