What does buying stocks mean

What is a share?

If you buy shares in a stock corporation (AG), you own a small share in this company or in the share capital of this company. You are then a co-owner and shareholder. This figurative explanation also applies quite well: If a company represents a whole cake, then when you buy a share you own a piece of this “cake”.

Other names for the term “share” are: security, paper, share certificate or simply value.

Why are there stocks? What do they bring an investor?

Companies give out company shares in the form of shares so that they can collect additional capital by selling the shares. With this income, they can continue to grow and make new investments. As a rule, only companies that have already reached a certain size dare to go public or IPO (definition) (this is usually not worthwhile for small companies).

The more shares an investor has in an AG, the greater the stake in this company. Stocks are traded on various exchanges where these securities can be bought and sold (what is the exchange?).

A share has a certain price or a so-called share price (definition) on the stock exchange, which is the result of the relationship between supply and demand. In simple terms, this means: the more investors want to buy a certain share, the higher the price rises. Or vice versa: the fewer people want to buy a certain share or the more people want to sell it, the further the price drops.

The goal of an investor in buying stocks is to make a profit. If you sell a stock at a higher price than you bought it, you've made money (but of course you can suffer losses). But be careful: you also have to consider the fees for buying and selling stocks.

As a shareholder you have various rights. For example the right to a dividend (but only if the company also pays a dividend). You can usually also attend the general meeting of the stock corporation (including voting rights), but a visit there is rather unusual for private investors.

What types of stocks are there?

There are several types of stocks that mainly determine the different characteristics of a stock. It is primarily about these 3 differentiations:

The different types of shares are usually not of great importance to the average investor. If you want to find out more about this, you should read this article: Types of shares - What types of shares are there?

Tip: share declaration in video form

Finally, a great YouTube video that I found and explains shares very simply in a good 4 minutes (in my opinion, this is a very clear description of what a share is): Click here and watch.

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