Investing 101

Lesson 1: Stocks and Their Value

Introduction

To begin, let's define a stock. Stocks are certificates that show you own a small fraction of a corporation. What you actually own is a small percentage of everything the company owns, its buildings, chairs, computers, etc.

Today, it is rare that paper certificates actually change hands. Most people prefer to leave their stocks on deposit with a broker making them easier to trade when they are ready to sell. As a stockholder, you also have voting power in company decision-making. This power is based on the number of shares you own. For most people, unless you are someone like Bill Gates (Microsoft founder) or Michael Dell (founder of Dell Computer), when you consider the fraction of shares you hold versus the total number of shares of the company that are available on the market, which is frequently in the millions, the amount of power that you have is very small.

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