Stocks

When you buy a stock, you are purchasing a share of ownership in a company. Each share represents a slice of the business, giving you a claim on its assets and earnings. Companies issue stocks to raise money for growth, new projects, or to pay down debt. When you own stock, you are known as a shareholder, and you may have certain rights, such as voting on key company matters at shareholder meetings.

The total number of shares a company issues is divided among all shareholders. If a company has 1 million shares outstanding and you own 1,000 shares, you own 0.1% of the company. The value of your investment rises and falls with the company's stock price, which is determined by supply and demand in the market.

Profit sharing is another important aspect of stock ownership. Some companies choose to share a portion of their profits with shareholders in the form of dividends. Not all companies pay dividends; some reinvest profits to fuel further growth instead.

Consider a company like Coca-Cola, which has a long history of issuing quarterly dividends to its shareholders. This means if you own Coca-Cola stock, you regularly receive a cash payment as a reward for your investment. Amazon, in contrast, reinvested its profits for decades to fund expansion - most of its big-tech peers did the same. Some have started shifting: Meta and Alphabet both announced their first dividends in 2024 as their growth slowed. Amazon hasn't, yet. The general rule: young, fast-growing companies tend to reinvest. Mature companies with slower growth tend to start paying dividends.

Stock prices can change daily based on company performance, economic news, or investor sentiment. If a company reports strong profits or announces an exciting new product, its stock price may rise as more investors want to buy shares. Conversely, negative news can cause prices to fall. This price movement is what creates the potential for capital gains or losses.