What is a stock?

What is a Stock?

A stock is ownership in a specific company. When you purchase a company’s stock, you own a tiny fraction of that company. 

What does that mean? 

Imagine you have money to invest, $100,000. Now let’s imagine you take all of that money and invest it in a mom and pop restaurant down the street from your home. If they do well, you do well, because you own a fraction of that company.

Why do companies sell their own stock?

It’s an easy way for them to raise capital for business ventures, it’s as though they auction off a percentage of ownership in their company at the market value.

What is stock day trading and can I make money off of it?

Stock day trading is the idea that you can make money purchasing undervalued stock and quickly sell it for a profit. A few things I’d like to point out:

  • If you’re trying to find a get rich quick scheme, you’ve missed a couple of steps.
  • Those that daytrade stocks 1) have a lot of money to spare and 2) know what they’re doing.
  • You’re more likely to lose money via commissions and bad trades than to earn any type of profit.
  • The short term gains on day trading stock are highway robbery via uncle sam and are rarely worth it unless you’re making more money than you know how to spend.
  • It takes a lot of studying and monitoring, as well as constant evaluations to be half decent at purchasing undervalued stock
  • If you’ve seen undervalued stock on the news, it’s too late.

Can I add stock to my investment portfolio?

Sure you can. As an advisor, I allow my clients 10% of their portfolio to be used for individual stock as play money if they’d like. However, more often than not, as we’re trying to build a portfolio into triple digits, it makes more sense to hold off on individual stock.

I usually try to be to the point and concise, if you have any questions that you feel could add to this article, feel free to email me brandon.young@fulgentwm.com