What is a Share of Stock, If Not A Slice of Pizza?

When a company goes public, they do it with the hope of expanding. Issuing shares of stock, or ownership in the company, is a way to raise capital and diffuse the concentration of ownership as a company scales up.

The process of becoming public and issuing stock can be time consuming and expensive for businesses - investment banks take legal responsibility for the shares, and usually lay out requirements that must be met before a business goes public.

TL,DR

Shares of stock are just small pieces of ownership in a corporation. To buy them, and participate in the stock market, you have to open a brokerage account to hold your investments. Why go through the work to open a new account? Betting on your favorite company by purchasing shares of their stock, helps them raise funds and allows you to make a profit. It’s a win-win!

Okay But Back Up… In The Simplest Terms?

Shares of stock are just small pieces of ownership in a company or corporation.

To buy them, and participate in the stock market, you have to open a brokerage account to hold your investments.

Why go through the work to open a new account? Betting on your favorite company by purchasing shares of their stock, helps them raise funds and allows you to make a profit. It’s a win-win!

What’s The Big Picture?

Shares of stock fall under the larger category of securities, which are tradable financial assets. Most securities, including stocks, are traded on the stock market. Trading stocks and participating in the market requires opening a brokerage account, which is designed to hold investments.

Once you have a brokerage account, you can fully partake in trading, buying and holding shares of stock and other securities. In doing so, you’re essentially betting on the success of a company.

Take Apple, for example- a company that has sold a huge volume of shares. This is due to their general success as a corporation. Betting on the success of Apple is fairly safe in normal circumstances — their products will only become more important in the years to come.

As such, it seems beneficial to purchase shares of Apple and own a small part of the company, so you can profit off of their future product drops and innovations.

What Can You Do When You Own A Share of Stock?

Most shareholders have no direct control over a company’s operations, although some have voting rights affording some authority, such as voting for the board of directors members.

This can be really important for activist hedge funds which try to take large stakes in companies and then change the board with a shareholder vote.