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What is a Stock?

BACK TO BASICS: New to investing? We're here to help. Watch this animated short to find out exactly what a stock is and the risks and benefits to investing in them

Emma Wall 15 August, 2016 | 11:43AM

 

 

Speaker: What is a Stock? In exchange for cash, the investor can buy a proportion of a company – called a stock or share. If the company does well the share price will go up, and the shareholder can crystallise this gain by selling the share. If the company does badly the share price will fall – this is the risk of being a shareholder and having what is known as equity investments.

Companies with spare cash will often chose to reward loyal shareholders with a pay-out known as a dividend. Large cash-generative companies pay a regular dividend either once, twice or four times a year. If one company buys another, or sells off some assets it may pay a one-off special dividend.

This animation was created by Morningstar UK video producer Roberto Iacurci

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author Emma Wall

Emma Wall  is Senior Editor for Morningstar.co.uk