Or at least take a look. The word ‘stock’ has several meanings and usages. From inventory, to bouillabaisse, to consider. It has wide ranging use, but at its root is the meaning of a part of a whole. Like when talking about a tree it means one offshoot or branch, in a store’s inventory it can mean the whole of or just a part of all the goods that are available for sale.
So, when thinking about buying stock of a company, we can think of it in the same way. It is a part of the whole. Share and stock are used interchangeably and you may recognize the term “shareholder” to mean a partial owner in a company.
Where do they come from?
When a for-profit corporation is formed there are shares created, usually for a small business something like 1,000. The price of each share is figured out by deciding how much capital (money) was used to start the corporation divided by the number of shares issued. The stock is created when a private company “goes public”, converts some of its shares into stock, and then sells them on an exchange – a market where you can buy and sell stocks. So, that same corporation can convert only a small portion of shares into stock or a lot, depending on what it is trying to accomplish. But bottom line is you are buying a piece, albeit small, of a company that you hope will some day be worth more than you bought it for so you can sell it for a profit.
Buy low, sell high
When us average mortals (not stock traders or brokers) buy stock it is usually for the long haul. And it is usually a small amount, not great wads of cash worth. So, the consideration is how much you have to spend on stock and what criteria do you want to consider, such as longevity, environmentally friendly, international, strictly local. And there are different classes of stock, like different classes on a plane, you will pay more for a first class seat (Preferred Stock), but you are likely to get more peanuts (Dividends). There are so many considerations to take into account when buying stock that although you can do it yourself through a number of platforms like online trading, it might be valuable the first time out to pay for a stockbroker to give you some advice.
The goal of most people when purchasing stocks is to buy them, wait a number of years for their value to increase, and then sell them when needed, say in retirement or to put a down payment on a house. If you are doing much more than that you can’t go wrong with doing a good amount of research, or hiring a good financial planner, or both. Not all company’s stock value continues to increase. And not all companies with longevity (Toys R Us anyone?) stick around forever. So, it may be tempting to buy and ignore, hope for the stock price to go up, but you should take a gander at those prices every once in a while to make sure you’re not putting your retirement or dream home at risk.