Investing 101: What is a stock?

June 11, 12:56 PMBusiness and Finance 101 ExaminerAndy Samuels

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(AP Photo/Katsumi Kasahara)

A stock is a way for companies to raise money instead of borrowing it.

By selling “stock” in their company, companies exchange small, fractional ownerships in their company for cash from investors.

Once the investor owns stock in a company, they can sell that stock on a stock market.

People buy stock in companies because if the company they own a piece of becomes more valuable, they can sell thier small ownership in that company for a higher price than they what they bought that ownership for. By doing this, over a period of time people can make money buying and selling stocks.

Investors can only buy stock in publicly traded companies. Private companies like Chrysler, who do not issue stock, are not traded on stock markets and therefore can not be bought and sold by the public. Public companies, on the other hand, like ExxonMobile are traded on stock exchanges and can be bought and sold by the public.

Stocks are represented on stock exchanges by ticker symbols.