What Is a Stock?

You're on your first step towards your goal of investing. Let's start with the basics, like what a stock is at the basic level.

Explaining stocks for beginners

Imagine that there is a jigsaw puzzle. This puzzle represents an entity. You are given a piece of the puzzle. Congrats—now you legally own a part of that entity!

In a nutshell, stocks are like pieces of a finite puzzle. When you receive or buy a stock, you own a part of the entity you have invested in. As a stockholder, you're entitled to a share of the profit that is generated through the company's growth.

Companies sell their shares when they go public through an IPO (initial public offering) to raise cash. This cash funds their operations and future expansion plans, both of which are beneficial to stockholders. 

Where do you buy stocks?

Investors buy and sell stocks on stock exchanges, such as the Nasdaq or the New York Stock Exchange (NYSE) .You can buy and exchange stocks through an online stock broker (like Raseed, which lets GCC investors partake in the US stock market).

Types of stock

There are generally two types of stock: Common stock and preferred stock. If you purchase common stock, you're entitled to vote, receive profits, and receive dividends. Preferred stockholders have priority for fixed dividend payouts and liquidation. I

Difference between stocks and shares

These terms are interchangeable and often used to refer to the same thing, as in "ownership of a company". Shareholders are the same as stockholders.