What is Stocks?
I’m pretty sure most of you know of stocks or at least have heard of it. You know the platform that is taking the world by storm. But what exactly is stocks and how can you, as a teenager, understand it? When you search stocks up on google, you get a plethora of information that uses long and completely confusing words. Like do you know what a decentralized system is? What about shares? If the answer is no or you aren’t completely sure, continue reading.
In this blog I am going to break down stocks and what it is, as well as some key terms related to stocks.
So first, what is the stock market?
The stock market is where investors can buy, sell, and trade shares of publicly-held companies. It is basically a global market where large sums of money are moved back and forth. Stocks can also only be traded Monday through Friday and this differs between stock exchange timings.
The stock market is an asset to new or developing companies as it provides them with an alternate method to get their company going, or to gain more money in case their company fails. This is why it is important to do research before investing in a company. You want to buy shares in a company that you believe has potential and will make you a profit. Shares are the means by which stocks are traded, bought, or sold.
What exactly are shares?
Shares is basically a virtual holding for an asset or a small portion of a company, think of it as you are owning a little portion of the company. In order to own that portion you have to pay some money to that company, in turn that company uses your money to improve their company and achieve their goals. And when that company you invested in does well, the value of your share goes up. This means profit for both the company and the shareholder(the person who bought the shares).
A person can buy multiple shares within the same company or across multiple different companies. The same way, an individual company can release more shares after the initial launching. A brokerage keeps track of stock records on behalf of their clients, for validity whereas cryptocurrency uses a crypto coded system where all that information is stored in block chains.
This is because the stock market is built upon a centralized system, meaning that there is a middle man between transactions to verify validity. However, cryptocurrency is a decentralized system, which means a computer does the entire transaction because there is no middle man. With stocks, once a purchase is made, the shareholder will receive a share certificate which shows proof of ownership. Think about it like land, you don’t have it physically in your hand but instead you have a proof that you are the owner of it, through say a certificate.
In addition, the financial products within the stock market are regulated. This means they abide by the rules in the financial industry, in an effort to prevent financial failures and to protect investors.
Interesting Statistics About Stocks:
The US represents 54.5% of the global stock market
Middle-class families have lost almost half of their household equities since 1989
Household equities is the difference between the amount of mortgage you owe and what your house is worth. Ex: say your house is worth $10,000 and you have $8,000 left to pay, you have $2,000 equity of your house.
The stock market usually performs the worst in September
Warren Buffet’s Berkshire Hathaway is the most expensive stock in the world
Worth $411,840 per share (as of July 2021)!
The global stock market is worth $95 trillion
