What is a Share of Stock

For people new to investing learning the language used on Wall Street and in classrooms around the world is essential. The phrase stock market often conjures up a picture of men and women running around like crazy. People yelling out numbers and words that you and I can't make out or understand.

To clarify a little let's start at the beginning and find out what a stock is.

Physically a stock is a piece of paper that proves the ownership of a piece of a company or corporation. If you own stock(s) in a company you own part of that company. Companies issue (sell) stocks to raise money (capital)

When you own stock in a company, say Microsoft, you become a Microsoft shareholder. Combine the value of all the shares of a company and you have its market capitalization. A company market capitalization is calculated by multiplying the current price of a companies stock by the number of shares the stock.

There are four major categories of stocks. They are common stock, preferred stock, duel class stock and treasury stock.

Common stock is, just like the name says, the most common kind of stock available. Ownership comes with some voting rights when decisions are made by the corporation.

Preferred stock is different from common stock in the sense that they usually get paid more dividends and they usually come with extra rights and decision making abilities.

Dual Class stock is a combination of common and preferred stock. The rights that come with dual class stock vary.

Treasury stocks are shares of stocks that were once issued to the public and have been bought back by the company.

The issuing of stocks goes back hundreds years to the Dutch East India Company. They began offering shares as far back as 1602. The East India Company pioneered the idea of joint ownership of property.

In the United States the New York Stock Exchange is the most popular place to trade stocks. Each day millions of shares of stock change hands at NYSE.

The world of stock trading can be very exciting and very profitable for those that learn the in's and out's. I hope you understand a little better what stocks are and what they are used for.