Lesson 1: Introduction to Stocks

What Exactly is a Stock?

A stock (also called a share or equity) represents a small piece of ownership in a company. When you buy a stock, you become a partial owner of that business. If the company does well, your piece becomes more valuable. If it does poorly, your piece becomes less valuable.

Real-World Example: If a company has 1,000,000 shares outstanding and you own 1,000 shares, you own 0.1% of that company.

Why Do Companies Issue Stock?

Companies issue stock primarily to raise money without taking on debt. This process typically happens through an Initial Public Offering (IPO), when a company first sells shares to the public.

Three Main Reasons Companies Go Public:

1. Fund Growth Initiatives – Expand operations, develop new products, or enter new markets
2. Pay Off Debt – Replace high-interest loans with equity financing
3. Provide Liquidity – Allow early investors and founders to cash out some of their ownership

How Do You Make Money from Stocks?

There are two primary ways investors profit from stocks:

1. Capital Appreciation
This is the “buy low, sell high” approach. You profit from the increase in the stock’s price over time.

Example:

• You buy shares of Company XYZ at $50 per share
• The price rises to $75 per share
• You sell and make $25 profit per share

2. Dividends
Some companies distribute a portion of their profits to shareholders through regular dividend payments. We’ll cover this in detail in the next lesson.

Key Stock Market Concepts

Ticker Symbols
Every publicly traded company has a unique abbreviation used for trading:

• Apple: AAPL
• Microsoft: MSFT
• Amazon: AMZN

Major Stock Exchanges

• NYSE (New York Stock Exchange): The world’s largest stock exchange, home to established, blue-chip companies
• NASDAQ: Known for technology companies and electronic trading

What Makes Stock Prices Move?
Stock prices are primarily driven by supply and demand. When more people want to buy a stock than sell it, the price goes up. When more people want to sell than buy, the price goes down.

Factors that influence supply and demand:

• Company earnings and performance
• Industry trends
• Economic conditions
• News and investor sentiment

Practical Exercise

1. Choose three well-known companies (like Coca-Cola, Apple, or Nike)
2. Look up their ticker symbols
3. Find their current stock prices
4. Note whether the price has increased or decreased today