A stock is a unit of ownership in a company.
A stock is a small ownership share in a company that allows investors to earn profit through price increase or dividends.
When a company needs money to grow, it divides its ownership into small pieces called shares. These shares are sold to the public. When you buy a share, you become a partial owner of that company.
For Example
Imagine a company like Apple Inc..
Suppose Apple divides itself into 1,000,000 shares.
If you buy:
- 1 share → You own 1 / 1,000,000 of Apple
- 1,000 shares → You own a larger percentage
Even though your ownership is small, you are still officially a shareholder.
That means:
✔ You can benefit if the company grows
✔ You may receive dividends
✔ You can sell your share anytime in the market.
Why do Companies Issue Stocks ?
Companies issue stocks mainly to raise money (capital) for business growth.
Instead of taking loans from banks, they sell small ownership pieces of the company to the public.
When people buy these shares, the company receives money.
Companies sell stocks to raise money for:
- Expanding operations
- Opening new branches
- Building factories
- Research & development
- Paying debt
Example:
Tesla, Inc. issued shares to raise capital to build new factories and develop electric vehicles.
Instead of borrowing money from a bank, companies sell ownership to investors.
Where are Stocks bought and Sold ?
Stocks are bought and sold on stock Exchanges.
A stock Exchange is a marketplace where buyers and sellers trade company shares.
Think of it like a digital market for company ownership.
What is Stock Exchange?
A stock Exchange is an organized and regulated platform where:
- Companies list their shares
- Investors buy and sell shares
- Prices are determined by supply and demand
It works electronically (online), not like a physical shop.
You cannot buy Shares directly from the exchange.
You need a broker account to trade in Stock Exchange.
How to make Money from Stocks ?
There are two main ways to make money from Stocks.
- 1> Capital Gain
Capital gain is when you buy a share and its price increase so it’s called capital gain.
Example:
You buy 1 share of a company at $50.
After 6 months, the price becomes $80.
Your profit = $30 per share.
This is called capital gain.
But if price falls to $40 → You lose $10.
- 2>Dividend Income
Dividend is when a company share profits to its share holder it maybe Quarterly, Interimly or annually.
Example:
Coca-Cola Company pays dividends.
If dividend is $2 per share and you own 100 shares →
You receive $200.
What makes Stock Price go up or down ?
Stock prices move because of supply and demand.
📈 Price Goes Up When:
- Company profit increases
- Good news comes
- Investors expect future growth
- Economy is strong
📉 Price Goes Down When:
- Company reports losses
- Bad news
- Economic crisis
- Investors panic
Example:
If Apple launches a new successful product → stock may rise.
If company reports weak earnings → stock may fall.