The Stock Market: What is a "Share" or "Stock"?
“Let’s start with what a share is. Essentially a “share” is like a virtual ownership of a company. It’s a piece of paper which says you own part of the company.
Now, suppose you had purchased 10% of all the shares of a bakery that made cronuts, they could either give you 10% of all the cronuts made everyday, plus 10% of the machinery and all the other things, or they could just give you a certificate which says you own 10% of the whole company. It’s a lot easier to leave the machinery where it is and let the others buy the cronuts and just give you a piece of paper.”
The travellers nodded. That did make more sense than carrying hundreds of cronuts home every day or trying to sell them on their way from school.
Grandma continued, “to understand it better, let’s think of a company as a pizza. Just like all the slices in the pizza make up a whole pizza, similarly all the shares in a company make up the whole company. Each slice in the pizza is therefore a “share” of the whole. Whoever wants to “invest” in the company can buy a slice of that company. Makes sense?”
The travellers nodded, it did make sense.
“A “share” of a company is the same thing as saying you have “stocks” in that company. Or saying you have “equity”. It’s just three ways of saying the same thing” she continued.
“But how would I even buy a slice of a company? Where would I go for that?” asked Teyus.