Glossary
Stock
A share of ownership in a company, which makes the holder a part-owner of the business rather than a lender to it.
Owning stock in a company means owning a fraction of that company. Not its building and not its products directly, but a claim on the business as a whole: a share of its profits if they are distributed, and a vote in certain company decisions. The fraction is usually tiny, and it is real.
This is what separates a share from a bond. A bondholder has lent the company money and is owed it back with interest, whatever happens to the business. A shareholder owns a piece of the outcome, which means there is no repayment date and no promised return in either direction.
Companies issue stock to raise money without borrowing it, giving up a portion of ownership in exchange for cash they never have to repay. Once those shares exist, they trade between investors on an exchange, and the company is not a party to those later trades.
The share price is set by what buyers and sellers agree on, moment to moment. It is not set by the company, and it is not an official measurement of what the company is worth.
Learn this properly
Lesson 1: What a Stock Actually IsA share is a small piece of a real company. Here's what you own, where the price comes from, and why it moves.
Related terms
- Ticker SymbolThe short code that identifies a security on an exchange, such as AAPL for Apple or MSFT for Microsoft.
- Market Cap (Market Capitalization)What the whole company is worth at today's share price: the price per share multiplied by the number of shares.
- Brokerage AccountThe account that holds your investments and places your orders on an exchange, opened with a licensed broker.
- ETF (Exchange-Traded Fund)A fund holding a basket of investments that trades on an exchange, bought and sold like a single share.
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