What Is A Stock And What Does It Mean?

Posted by Nick Niesen on November 8th, 2010

What is a stock? A stock is a certificate of paper that proves your ownership of a piece of a specific corporation. Only companies and businesses that have been incorporated can issue stock which may be publicly traded. Being incorporated means that the corporation becomes seperate from the people who run it. Even if all the personnel were replaced, the corporation is not changed as a business. A stock is proof that you own a part of the company and everything it owns, including the vehicles, buildings, and all equipment. Anyone who owns stock is considered a shareholder in that specific company.

By owning a stock in a corporation, you are hoping that the company will grow and profit. As a shareholder of stock, you profit when the company does in a number of ways. If the company makes a profit, then shareholders receive dividends which reflect those profits. The price of the stock may also increase when a company has a profitable period, and stock holders will have an increase in the value of the stock that they own.

There are four levels of stocks that are available. Penny stocks are stocks from small companies that have almost no growth potential. Growth stocks are stocks for companies that have great success potential. Secondary issue stocks are stocks from companies which are well established and have great growth potential. The highest level of stock available are blue chip stocks, and these stocks are from old companies which have been established for years and decades.

Owning stock in a company also gives you a say in the company. Obviously, the more stock you own, the more of a say you have. The stock you own allows you to vote at corporate meetings, but a proxy ballot can be filed if you choose not to attend. Matters that are voted on include sitting Board of Director members, additional issues of stock, and other company related business.

A stock is proof of ownership in a corporation. This allows you to vote at corporate meetings concerning company business. Stock is a guarantee that if the company profits, you profit as well. By purchasing stock in a company, you are hoping that the corporation becomes more successful. Shareholders can profit from the success of the company by receiving bigger dividend checks and a higher value for any stock that they hold.

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