The stock market allows anyone to buy and sell fractional ownership of publicly-listed companies. It distributes control of some of the world’s largest businesses among hundreds of millions of individual investors. It’s also where companies raise vast sums of money to accelerate successful startups, expand their operations, pay off debt, or consolidate their holdings and merge with other firms. The stock market is regulated by federal and state agencies to ensure fairness for everyone involved.
While the stock market has a history of consistent gains, stocks can also be volatile. Share prices rise and fall based on demand from investors, the company’s performance, economic conditions, and other factors. It’s important to understand what a stock actually is before you begin investing in it, and to know the risks of investing in shares.
Stocks are a type of security; tradable financial assets that represent ownership (as in the case of stocks), a debt obligation (as in bonds), or rights to ownership (as in the case of options). Stocks are generally categorized as common or preferred shares. The majority of individual investors own common shares. Common shares give shareholders proportional ownership of a company as well as voting rights, giving them a voice in matters like management elections and structural business changes. They also have a right to the company’s profits in the form of dividends.
Companies raise capital by selling shares of their stock to investors. They do this in the primary market through things like initial public offerings, private placements, and debt offerings. Once a stock is issued, it enters the secondary market where it can be bought and sold on exchanges or over the counter. Over 58,000 companies worldwide have shares that are publicly traded today.
A stock report provides information about the value of a stock and its current price in the marketplace. It also includes a description of the company behind the stock, its products and services, as well as the financial health of the firm. It’s essential that a stock report be organized and easy to read, with headings and subheadings to break down complex concepts into smaller parts. Visual aids, such as charts and graphs, can also be used to help readers understand key points.
A stock’s worth depends on its fair value, which is a calculation of its intrinsic value based on the company’s financial fundamentals, and its market value, which is what people are currently willing to pay for it. The difference between these two can be very significant, and it’s up to the investor to decide whether a particular stock is worth buying or selling based on the information in a stock report.