Last updated: 19 August 2025
What Is a Stock?
A stock represents fractional ownership in a company. Shareholders may benefit from price appreciation and, if declared, dividends. Prices change as expectations evolve.
Key Ideas
- Ownership: stocks reflect a claim on a company’s future outcomes.
- Drivers: supply and demand, business results, and sentiment influence prices.
- Time horizon: short-term moves can be volatile; long-term results depend on fundamentals and discipline.
How Markets Work
Public companies list on regulated exchanges. Buyers and sellers place orders that match continuously, forming prices in a transparent auction process.
Order Basics
- Market order: aims to execute quickly at available prices.
- Limit order: sets a maximum buy or minimum sell price; may not fill.
- Stop/stop-limit: triggers when a chosen level is reached.
Trading involves costs (e.g., commissions or spreads) that vary by provider.
Core Principles
- Diversify: avoid concentrating in a single company or theme.
- Plan: define entry, review points, and exit rules in advance.
- Record: track decisions to learn from outcomes.
- Understand: focus on businesses you can clearly explain.
Key Risks
- Market risk: broad moves can affect most stocks.
- Liquidity risk: thin trading can make execution difficult.
- Issuer risk: a company’s setbacks can lead to losses, including total loss.
- Concentration risk: limited diversification increases volatility.
- Currency risk: non-local exposures can change returns.
Past performance is not a reliable indicator of future results.
FAQ
How much to start? Some providers allow buying a single share; terms and fees vary.
Where to learn? Public filings, company updates, and reputable education sources.
Short vs. long term? Short term can swing quickly; long term emphasizes business progress.