If you listen to the news, or a variety of people talking, you have probably heard people mention stocks. Are they up? Are they down? Lots of people want to know. But, you may be wondering…
Just what is a stock?
What is a Stock?
A stock represents a fraction of ownership in a company. Other terms sometimes used for stock are equities, shares, and securities.
Although often used synonymously, a share is an actual unit of stock.
What is a stock dividend?
A stock dividend is money that is paid to a company’s owners (stockholders).
You can think of a dividend as a shareowner’s profit for owning a fraction of a company. The dividends are paid out on a regular schedule.
What types of stock are there?
There are two main types of shares. The most popular type of is common stock. The other main type is preferred stock.
Common stock is the stock to which people are usually referring. Common shares represent ownership in a company. Each share represents a fraction of ownership. Common share owners are the company’s owners. These owners have voting rights. If the common share issues dividends, the owners receive those dividends.
Preferred stock is a share that has preferential treatment (relative to common shares) when it comes to dividends or asset distribution. This means that holders of preferred shares have the right to any available dividends before common stockholders. In a case of a company liquidation, holders of preferred shares also have the right to assets before common stockholders, too.
However, holders of preferred stock usually do not have voting rights.
Do all companies have preferred stock?
A stock issuing company is required to issue common stock. But, they are not required to issue preferred shares. Most companies do not have preferred shares.
Can I lose money investing in stocks?
Yes. You can lose all of the money that you put into purchasing the shares.
All investing involves risk. An investment’s past history of profit does not guarantee future profit.
Can I lose more money than I invested in stocks?
Yes, if you purchased the equities with something called a “short sale,” you can lose more than the money that you invested.
Can I make money with stock?
Yes. You can make money with equities. People can make money with them primarily in two ways. One way is to make money as the value of the shares increases (share appreciation). Another way to make money with equities is through receiving dividends.
Who can buy a stock?
Anyone can buy an equity. You just have to have a brokerage account. If you are under the age of 18, you have to have an adult open a custodial account for you.
Opening a brokerage account is creating a contract between the individual and the brokerage house. Minors cannot sign and enter into contracts.
What is the stock market?
A market is where you buy things. So, a stock market is where stocks (and other financial instruments) are bought and sold.
The stock market consists of a group of exchanges in which equities are bought and sold. I think of it as being similar to a giant antique fair, at which various antique dealers represent the various exchanges. Companies offer the shares of ownership to investors as a way to raise cash for the company.
When is the stock market open?
The regular hours for main exchanges in the United States are between 9:30am and 4:00pm, Monday through Friday.
However, pre-market trading is available at some brokerage houses. Pre-market trading is available from 4am to 9:30am.
Also, after-hour trading is available from 4pm to 8pm. This is also available at only some brokerage houses
One brokerage house that has both pre-market and after hour trading is the discount broker, Robinhood.
What is extended hours trading?
Extended hour trading is any trading hours that are outside of regular trading hours.
Extended trading hours include pre-market hours (4am to 9:30am.) and after hours (4pm up to 8pm.)
What is a stock broker?
A stockbroker is a person who buys and sells equities for their clients.
The broker is a regulated position.
Who regulates stock brokers?
Stock brokers are regulated by FINRA.
FINRA is the Financial Industry Regulatory Authority. FINRA is a government-authorized that handles the regulation and licensing of stock brokers.
Stock brokers are also regulated by the SEC. The SEC is the Securities and Exchange Commision. The SEC is a government agency.
How much do stockbrokers cost?
It is common for a stockbroker to earn from 1 to 2% of the assets that they manage for the client.
I like and use Robinhood.
If you are interested in starting a Robinhood Investment Account, here is a post that explains it.
Spilling the Tea on How To Start a Robinhood Investment Account
Or, you can go directly to Robinhood to start an account. Here is the link: Robinhood
Full disclosure: If you sign up for a Robinhood account, I will receive a small payment from Robinhood. But, this does not cost you anything.
Would you like to read more? Check these out:
Stock in Focus: Pioneer Natural Resources
Wondering About Rich Mom?
If you stumbled upon this post and you are wondering who Rich Mom is: I am a mother to a young adult. I have majors and degrees in business, economics, and education, and I am passionate about financial literacy and personal finance. I am worried about the future of young adults who are often being burdened by massive student loan debt, but at the same time have never been taught about financial literacy. So many people work, forever living just paycheck to paycheck, never understanding the pattern that would make their lives easier. My goal with my blog is to inspire those ages 30 and under to become more financially literate, become financially independent, and be able to live a healthy (mentally and physically), happy, generous life, in which you can help others do the same.
I am not an investment advisor. Always do your own due diligence and research before investing. Check with your own investment advisor.
Also remember that past performance is not a guarantee of future performance.
Really nice blog. Have you started on the book you purchased at Barnes and Noble yet?
Hi Johnny! It was such a pleasure meeting you! I am going to start reading the book today. Thanks for the kinds words about my blog. I see that you saw one of my financial literacy style posts, which is more about defining things. You should check out today’s post. It’s about a stock called Pioneer Natural Resources: Stock in Focus: Pioneer Natural Resources
Thanks again for stopping by. I hope to hear from you again. Have a fantastic day! I’d love it if you would share links on your social media, to any posts that you like.