Lesson 1 of 5 · 6 min read
What is a stock?
A stock is a small piece of ownership in a company.
A piece of a company
Buy 1 Apple share and you're a co-owner of Apple — very small, but real. A company is split into millions or billions of these pieces. When the company becomes more valuable, your piece usually rises with it. When things go badly, it falls.
A simple example
Imagine: a pizza shop is split into 100 shares and is worth €100,000 in total. One share is then €1,000 (1% of the shop). If the shop doubles in value to €200,000, your share is worth €2,000. It works the same way at Apple — just with a lot more zeros and shares.
Why do companies sell shares?
To raise money to grow: new products, people, factories. Instead of an expensive bank loan, they sell pieces of ownership to investors. That's called 'going public' (an IPO).
How do you earn? — capital gains
Way 1: capital gains. You buy low and sell (hopefully) higher. Buy a share for €100 and sell it later for €130, and you have €30 profit per share. Until you sell it's 'paper' profit — it only becomes real when you sell.
How do you earn? — dividends
Way 2: dividends. Some companies pay out a portion of their profit to shareholders, usually each quarter. It's a kind of 'rent' you receive simply because you own the share — regardless of whether the price rises.
In practice
If you own 50 shares of a company that pays €2 dividend per share per year, you'll receive €100 per year — just for holding the shares, regardless of the price.
Stocks ≠ gambling
A casino is pure chance. A stock is a piece of a real company that sells products and makes profit. In the short term the price moves erratically, but in the long term it follows the value of the company. That's why learning and patience are the key.
S&P 500 historically returned ~7% per year after inflation
Over rolling 20-year periods, the return of the broad U.S. market was almost always positive. The short term is erratic, the long term rewards patience.
Remember this
- A stock is a small piece of ownership in a real company.
- You earn in two ways: capital gains (buy low, sell high) and dividends.
- Dividends are optional — not every company pays out profit.
- Erratic in the short term, but in the long term the price follows the value of the company.
There is a quiz for this lesson
3 questions that check whether it stuck. They live in the app, because a quiz nobody grades teaches nothing.
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