Definition

A stock represents ownership in a company and constitutes a claim on part of the company’s assets and earnings. Stocks are also referred to as "shares" or "equity."

Analogy

Think of a stock like owning a slice of pizza from a pizzeria. If you own one slice out of an eight-slice pizza, you own one-eighth of that pizza. Similarly, if a company has 1,000 shares and you own 100 shares, you own 10% of that company. Just as the value of your pizza slice might increase if the pizzeria becomes more popular and successful, the value of your stock can increase if the company performs well.

Little-Known Fact

This fact is so cool! In the 1950s, the United States researched the Hydrogen Bomb (or Thermonuclear Bomb). Physicists were forbidden to reveal which fuel they used for it. But a lot of people were curious about it.

A professor of economics, Armen Alchian, discovered that they used Lithium as fuel. He saw that during the tests, the stock price of Lithium Corp rose significantly. This company saw a return of 461% during the primary year of the experiment!

Armen Alchian tried to publish his findings. But it was forbidden by the government for national security. Only much later was he able to publish it!

Action Step: Discover a Stock in Your Everyday Life

Take a walk around your neighborhood or look around your home. Pick five products or services you use daily (e.g., your favorite coffee shop, your phone, or your grocery store).

1. Find out if the companies behind these products are publicly traded.

2. Check the current stock price of one of them.

3. Learn one fact about the company (e.g., when it was founded or what it’s known for).