What is a stock, and what do you actually own when you buy one?
A share of stock is a small slice of a company. Here is what that slice gives you, the two ways it can pay off, and why you can lose money.
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Stocks: what you actually own when you buy a share
A share of stock is a small piece of ownership in a company. These notes explain what that ownership gives you, how trading works and how to read the numbers.
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A share of stock is a small piece of ownership in a company. These notes explain what that ownership gives you and what it does not, how buy and sell orders meet on an exchange, why market orders and limit orders can fill at different prices, what a stock market index measures, how dividends are declared and paid, and how to read a price-to-earnings ratio without treating it as a verdict. Examples use U.S. rules and sources because they are the most fully documented in public; rules differ by country, and each note says where they do. The notes below are listed in reading order: start at the top, or jump straight to the question you have. Every note ends with its numbered sources.
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How do stock exchanges work, and what happens after you press buy?
An exchange is a marketplace that matches buyers and sellers. Here is how prices are quoted, where your broker sends your order, and what happens after the trade.
Read the noteWhat is a stock market index, and how is one calculated?
"The market was up 1% today" usually means an index was up 1%. Here is what an index measures, how weighting changes the answer, and how investors use one.
Read the noteHow do dividends work, and when do you actually get paid?
A dividend is part of a company's profit paid to shareholders. Here are the dates that decide who gets paid, the yield arithmetic, and why dividends are never guaranteed.
Read the noteWhat is the P/E ratio, and what can it tell you about a stock?
The P/E ratio tells you how many dollars investors pay for one dollar of a company's yearly earnings. Here is the arithmetic, a fair way to compare, and its blind spots.
Read the noteMarket order vs limit order: which one controls what you pay?
A market order trades now at whatever price is available. A limit order trades only at your price or better — if at all. Here is how to choose.
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