What is a share
What is the stock market?
Before you can learn the techniques of assessment and timing, you need some background understanding of what a share is, how the share market works and where you can profit from it.
The Stock Exchange is a place for buying and selling shares, sometimes called the “stock” or “Share” Market. In South Africa, the Stock Exchange is situated in Johannesburg, and is called the Johannesburg Stock Exchange (JSE). There are Stock Markets all over the world – In London, the London Stock Exchange (LSE), Sydney, Australia (ASE)and in New York, the New York Stock Exchange (NYSE) the Dow Jones which is a part of that, The Standard & Poors also a subset of that, and the NASDAQ which is mostly technology stocks. Unlike other markets we are used to, where there are normally buyers on one side and sellers on the other, in the stock market, the buyer and the seller can usually be the same person.
To buy and sell stocks, you need a stockbroker. Nowadays, this can be online as well as the traditional phone broker of the past. Online brokers are normally much less expensive than traditional brokers, but either way, there is a cost associated with trading. Most of these people would not be willing to put their money into such an organization if they had to ‘be involved in its management, or if they became responsible for its debts.
What is a share?
What is all of Apple’s (AAPL) shareholders were involved in the direct management of the company? Would you want to buy shares in a company if you could become responsible for its day to day management, or debts. Chaos? Too much risk? So, companies are treated as separate entities or persons, totally responsible for their own debts and their own management. That reduces the risk to you as a potential shareholder.
When you own a share of a company, like Apple, you actually OWN a part of that company, and pay a certain price per share for that ownership. Having shares is one way a company can raise finance or capital. There are normally hundreds of millions of shares. For example, Apple has about 800 million shares.
The financing of the business is thus broken down into small parts called shares – there may be a million, or there may be several hundred million shares. Owning shares entitles you to several things, one of which is a hare in the company profits through receiving regular dividends.
If the shares are listed on the Stock Exchange, you can buy them and sell them whenever you wish, assuming there is a willing buyer (if you are selling) or a willing seller (if you are buying) at the price you want to trade at.
