What Is A Stock? How to make money 2022

For most investors, stocks are the first asset class they encounter. It makes a lot of sense. Our world is driven by companies, so it’s natural for people to want a piece of the action. But when you buy a share of a given company, you don’t actually own a fraction of that company as an entity or a to least not directly. Instead, each share represents a claim on the company’s assets. This distinction might sound trivial, but it’s actually very important. Corporations are legally considered as people. They can own cars and houses in the same way that you can, and they can even borrow money and go into debt. There are many examples of companies borrowing too much money and going bankrupt, but legally that event has nothing to do with you, the shareholder. You just don’t claim on that company’s assets. And if the company doesn’t have any assets, what was in your shares are worth zero. But the banks who loaned money to that company can’t come after you. In other words, the most you could lose by purchasing a share is the amount of money you spent on it. Realistically, it’s hard to imagine the world’s biggest companies going bankrupt, which is why their shares are considered safe investments. Let’s say you want to buy shares of McDonald’s, for example. You log into your brokerage account, you make an order, and bam, you’re now the proud owner of one share of the McDonald’s Corporation. You’re now officially a shareholder, but that doesn’t mean you can go into any of their restaurants and eat a happy meal for free. So what benefit does only McDonald’s start give you? Well, Like most companies, the McDonald’s Corporation sets aside some of its profits every quarter and based them out to their shareholders. This is known as a dividend, and it gives you a steady stream of cash. But wait, it gets even better. McDonald’s opens new restaurants every year, so you can reasonably expect the company to have higher earnings in the future, which not only means more dividends for you but also increases the value of the company itself. Thus, if you bought your share for $150 it might be worth 160 next year. As a proud McDonald’s shareholder, you can attend to the company’s annual meeting, where you can vote on many important decisions, which will impact the future of McDonald’s. Now, most companies have a very simple voting structure. One share gets one vote. In your case, you own one out of the 785 million McDonald’s shares in existence. So you command exactly this much of the voting power in the company. Obviously, you wouldn’t be able to change much with your vote. But the more you invest in the company, the bigger your impact is gonna be. With enough money, you could theoretically, by up enough of the shares to single handedly become the majority shareholder. That is the magic of publicly traded companies with enough money. Anyone convey I their way in. Now that sounds awesome. But you might be wondering, Why would any founder give up their company by listing it on the stock market for everyone to buy in the next video were learned the answer to exactly that question.