Stock is ownership in a company. Each share of stock
represents a tiny piece of ownership. The more shares you own, the more of the
company you own. The more shares you own, the more dividends you can earn when
the company makes a profit.
In the financial world, ownership is called
equity.
There are two primary classes of stock. Which one you choose
depends on what you want from a stock.
Preferred stock typically pays
regular dividends and is favored by investors who want income foremost from
their stocks.
Common stock represents
ownership of a company and may offer more rights and privileges than preferred
stock.
Investors may
purchase stock on the primary or secondary market.
A company sells its stock to the public on
the primary market through its initial public offering. Investors may sell their
shares through brokers to other investors on the secondary market. The secondary
market is structured as either an auction market or negotiated market. The
auctions are conducted on the major stock exchanges. The NASDAQ is a
negotiated market. Today it is even possible to trade stock on the Internet. One
can find stock prices (quotes) in newspapers, on television, and on the
Internet.
On the next screen, you will find out why companies sell
stock in the first place.
