October: This is one of the peculiarly
dangerous months to speculate in stocks.
The others are July, January, September,
April, November, May, March, June,
December, August, and February.
Samuel Langhorne Clemens,
better known by his pen name Mark Twain
What is a stock?
A stock is a kind of security to indicates that a person owns a piece of that business. It also signifies that there is ownership of the business’ assets and earnings.
Business’ that are set up as corporations have stock issued to show ownership in the business. The articles of incorporation that a business has to setup defines the number of shares authorized to be issued for the business. These are the shares that can be offered to the public at the board of directors consent.
Stocks used to be issued in paper form but now they are all handled electronically. It is fun once in a while to see the old stocks. It brings a feeling of nostalgia.
Public companies are the only ones that can issue stocks shares for ownership in their business. Think of Target, Walmart and so on. Companies can go from public to private as well such as Petsmart recently. In a case like this, the public shares all have to be liquidated so that ownership can return to the private party.
Private companies such as Uber, the ride-sharing business can go public or offer shares in their company. This is called an IPO or initial public offering. These usually receive a lot of hype and tend to be very expensive. I would counsel you to avoid these if at all possible. More on this later.
Shares are stock in the company. So when you own 100 shares of Amazon you own 100 stocks of the company. Once you have purchased shares of a company you are considered a shareholder and these shares give you certain rights of ownership.
Why companies issue stock.
Reason number one for a company to issue stock is to raise MONEY!! When a company decides to sell shares of its company, those shares have a value that someone will decide upon. When those shares are purchased it generates capital for said company.
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