What is a stock?


Ryland Goldman - Thursday, April 29th, 2021

There are a ton of companies in the world. Some of them are nearly impossible to be a part of, while others you can invest in with the click of a button. These few thousand “public” companies, or companies that anyone can buy a part of, can range from tech giants like Microsoft or Intel, to retailers like Costco or Amazon, to banks like JPMorgan Chase or Wells Fargo.

Public companies that trade on an exchange are the most common kind of stock. Stocks are intangible assets that are given value by people willing to buy them at a certain price. Other than companies, there are things like bonds, commodities, or derivatives that are stocks, but are more complicated for beginning investors.

Stocks are traded in shares, which is a very small piece of a company that represents ownership. By buying a share in Pepsi, for example, you actually own 0.000012% of Pepsi and can do things like vote at a shareholders meeting to decide how the company will be run. Each share has a price, and it can vary from company to company.

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The value of the company is called the market capitalization, or market cap. Using our example from above, Pepsi is valued at around $200 billion (as of when this is published). Divided by the number of shares, a share of Pepsi is worth roughly $140. A company’s value can fluctuate based on many different factors, such as company news or how the market is doing in general.

Stocks can be catagorized in many different ways. In the next article, we will learn about indexes, which are groups of stocks that make it easier to follow how the stock market is doing as a whole.


Next: What is an index?