What is Stock?

What is Stock? Companies need money to help them grow. They use it for all kinds of things like buying materials to make their products, developing new products, building plants, and hiring people to work at their companies. To do this, they often split ownership of their companies into smaller "shares" that they sell to the public. The shares are also called "stock."

Why do people buy stock? Shareholders, as stock buyers are known, hope to buy shares at a low point, hold on to them for a while and finally sell them at a high point. This is one-way people make money from stock ownership. Generally, shareholders have an interest in the company's products or services and its prospects for growth.

sometimes companies give some of their profits to shareholders with cash payments called dividends - this is the other way to make money from stock ownership.

the stock market is where shares of stock are bought and sold, called trading. There are stock markets in a number of countries in the world, but in the U.S. a lot of stock is traded at the New York Stock Exchange and through the Internet, mostly on the NASDAQ, but at other sites as well.

The main point is that through trading, the price of a company's shares fluctuates every day, so the value of your shares also goes up and down. That's what makes it important to view stock ownership from a long-term perspective. This is something you and your child can watch together and discuss over time.

That's the altruistic side of it. The other side is that it's an excellent way to make your own savings grow so you can afford those long-term goals like college, cars, and houses.

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