What is a Stock?

Published: 01/04/23

Hello! Today’s topic is: Stocks.

A stock represents a very very very tiny percentage of ownership in a company. For example, if you buy 1 Apple stock you would own 0.000000009% of the company. So, while you may not own much of the company, what you really care about is how this affects your profits. Buying individual stocks is one of the more risky investments because you are putting all your eggs in one basket. If you put $100 into Starbucks, and all of sudden people decide they don’t like Starbucks anymore and the stock goes down, you will lose a lot of money. However, the same is true in reverse, if you buy a stock in a company and they do really well, you can make a lot of money.

There are 3 main types of stocks. First is the penny stock. These stocks trade at really small amounts of money, usually classified as $5 or less, and these are the riskiest types. Usually these are very small companies which have the highest chance of going out of business, but also have the most amount of room to grow. Google once started as a penny stock, and now it is up more than 6,150%!! However, most penny stocks won’t make you any money, or even worse they have a high likelihood of losing you money. This is the epitome of high risk, high reward.

Next are your big name stocks. These are your Apple, Amazon, Netflix, Tesla, you get the idea. These companies are not going anywhere any time soon because they dominate the market. However, that also means they have less room to grow their business, leading to a much safer investment, but will likely not spike up a crazy percentage.

Finally, you have all the stocks in between.

What I would recommend is to buy stocks in companies you have done your research on and are confident with. Make sure not to throw all your money into one stock. It really depends on what you want with your investments, so do what is right for you.

As always, if you have any questions or clarifications, don’t hesitate to leave your questions in the box at the bottom of my website!