What Is A Stock?

What is a stock? A share of stock is simply an ownership interest in a company. A share of stock is simply an ownership interest in a company. So if you own one share of stock of McDonald's and there are...

A share of stock is simply an ownership interest in a company. So if you own one share of stock of McDonald's and there are a million shares outstanding, you own one millionth of that company. Then you participate in the good fortune or the misfortune of that company by seeing the stock value go up or down.


The best way that you can get into investing in stocks is first of all for the new beginners, not to necessarily buy individual stocks, but to buy mutual funds. Mutual funds have a professional manager that makes decisions on which stocks to buy for you. Within that fund, they may own 200 different companies. So you participate in the value of that fund going up or down. The problem with just buying one stock for instance or two stocks or five stocks is that you are not very well diversified. So even though the company may be doing well, if something goes bad with that company it's much riskier than owning a mutual fund where you are diversified amongst several different companies. If you buy individual stocks, I don't recommend you have more than 4% of your money in any of the stock. So let's say you have $100,000 to invest in the stock market. You should be putting more than $4000 into the each individual stock. So you should earn 25$-50$. These days in the age of internet, it's as simple as clicking your mouse to buy stock. There are lots of online discount brokers and you can set up an account online or through the mail, whatever you are comfortable with. You can monitor the value of your mutual funds or stocks online. You can buy stocks and sell them or buy mutual funds and sell them with the click of the mouse.


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