Apple’s stock price is now at a new record high!
You may have turned on the TV recently and the news reporter may have mentioned the record high stock prices of Apple, Amazon, Facebook, or Google. Perhaps this caught your attention and you are wondering – what is a stock and how can owning stocks earn me money?
This post will serve as a brief and simple introduction to stocks and how it can help you #BuildYourNest!
What is a stock?
A stock represents partial ownership of a corporation. As a partial owner, you have a right to the company’s assets and earnings.
Let’s say you’re an Apple fanatic and own the whole suite of products (iPhone, iPad, Macbook Pro, etc). You believe that Apple offers its consumers user-friendly and innovative products and decide you would like to invest in the company. At the time of this post, 1 share of Apple is $173 and you realize you have saved enough money to buy a share of stock (I’m going to be rich!).
You purchased one share of Apple and you are now a partial owner of the company, congratulations!
But this idea of being a partial owner has limitations. Imagine a GIANT pie that can be cut into 5.07 BILLION slices (Yes, BILLION!). You purchased ONE share of stock in Apple which means you are ONE owner out of 5.07 billion! Although you have a right to a company’s assets and earnings, you won’t be able to rule the company (Bummer, I know).
Selling the stock at a higher price than you originally purchased it for and receiving dividends help you build your wealth.
What is a dividend?
A payout of company earnings to you (the investor).
A company can payout a portion of its earnings to their investors in cash. You, as the investor can elect to receive cash or reinvest the dividends to purchase additional shares of stock.
Pretty cool right? You’re being rewarded for owning a piece of the company!
Stay tuned for future posts as we expand your burning curiosity on stocks.