Stocks 101

This article will cover the fundamentals of what a stock is and the role it plays in the financial markets.

You’ve probably heard statements like “Nvidia is down 10% today,” or “The S&P 500 has hit an all-time high.” But what do these headlines really mean? In this article, we’ll explore the basics behind such market movements and explain how stocks function.

At its core, a stock represents partial ownership in a company. When a company wants to raise capital, it can do so by offering shares of ownership to the public through an Initial Public Offering (IPO). Once this process is complete, the company becomes publicly traded and its shares are listed on a stock exchange.

Some of the most prominent stock exchanges globally include the Nasdaq, the New York Stock Exchange (NYSE), and the Shanghai Stock Exchange. The NYSE is the largest of them all, with a market capitalisation exceeding $31.58 trillion.

Types of Stocks

There are several different categories of stocks, each with its own characteristics and investment strategies:

Growth Stocks – Companies expected to grow at an above-average rate compared to the market.

Blue-Chip Stocks – Shares of well-established, financially sound companies with reliable performance.

Defensive Stocks – These stocks remain relatively stable during economic downturns and are particularly relevant in today’s volatile market conditions.

Dividend Stocks – Stocks that regularly pay out a portion of company earnings to shareholders.

Penny Stocks – Typically traded on over-the-counter (OTC) markets like the OTC Bulletin Board (OTCBB) or Pink Sheets. These platforms have looser listing requirements compared to major exchanges like the NYSE or Nasdaq. While some penny stocks are listed on major exchanges, they are generally associated with companies that have low market capitalisation or stock prices.

In conclusion, understanding what a stock is and how it functions is essential for anyone looking to navigate the world of investing. Whether it's hearing headlines about major market dynamics or exploring different types of stocks like blue-chip, growth, or penny stocks, having a solid foundation helps you make informed decisions. As you dive deeper into financial markets, this basic knowledge will serve as a stepping stone toward smarter investing and a better grasp of the global economy.

Published by ~ Ansh Tandon