Module 1 – Understanding the stock market

Over the last decade, the word “stocks” has been gaining a lot of popularity. From social media to the news, I feel like I see information about stocks almost everywhere.

1.1 What are stocks?

Stocks are essentially ownership of a company. When you buy a stock of a company, you are basically owning a piece of that company (most likely a very tiny piece, but piece of it none the less); you become one of the many shareholders, as you are now own some shares of that company.

Why would you buy stocks? Well, the primary reason most people buy them is in order to “invest”. And what we mean by invest is that we hope to buy them for specific amount and sell them for more amount than what we bought it for, making a gain (or “profit”).

1.2 What is the stock market?

First let’s talk about what a “market” is in general. In the most basic terminology, it’s a place where you go to buy/sell goods. For example, here in the UK we have Tesco, one of the popular supermarkets – people go here to buy food, and in this case the people are the “buyers” and Tesco are the “sellers”.

In that same way, stocks will have buyers and sellers. When you buy stocks, you’re buying it from someone who currently owns that stock and wants to sell it; vice versa, when you sell a stock, you sell it to someone who wants to buy it.

And this buying and selling occurs via a stock exchange.