What is a Stock?
A stock (also known as equity) represents ownership in a company. When you purchase shares of a company's stock, you become a partial owner of that company. This ownership stake comes with certain rights, including the right to vote on important company decisions and to receive dividends if the company distributes them.
How Stock Exchanges Work
Stock exchanges are marketplaces where buyers and sellers come together to trade shares. Major exchanges include the New York Stock Exchange (NYSE), NASDAQ, and in Malaysia, Bursa Malaysia. These exchanges provide a regulated environment where stock prices are determined by supply and demand.
Key Concepts
- Market Capitalization: The total market value of a company's outstanding shares, calculated by multiplying share price by total shares outstanding.
- Stock Price: The current trading price of a single share, which fluctuates based on market conditions and company performance.
- Volume: The number of shares traded during a specific period, indicating market activity.
- Dividends: Periodic payments made by some companies to shareholders from their profits.
Types of Stocks
Stocks can be categorized in several ways. Common stock typically voting rights and potential dividends, while preferred stock usually offers fixed dividends but limited voting rights. Stocks are also often classified by market capitalization (large-cap, mid-cap, small-cap) or by sector (technology, healthcare, finance, etc.).
Reading Stock Quotes
Understanding stock quotes is essential. A typical quote includes the bid price (what buyers are willing to pay), ask price (what sellers want), and the last trade price. The difference between bid and ask is called the spread.
Important Note
This article is for educational purposes only. Stock market investments involve risk, including potential loss of principal. Before investing, conduct your own research and consider consulting a licensed financial advisor. This is not investment advice.