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What is a stock?

A stock is a small piece of ownership in a real company. Here is what that actually means.

5 minEducation only, not financial advice

Finance saysWhat is a stock?
In your world

Buying a mascara makes you a customer of L’Oréal. Buying a L’Oréal share makes you a (very small) owner of the company that makes Maybelline, Lancôme and Garnier.

A stock (also called a share) is a small piece of ownership in a company. When a company is split into, say, one billion shares and you own one, you own one-billionth of that company.

Why companies sell shares

Companies sell shares to raise money: to build factories, launch products or hire people. In return, shareholders own part of the business and share in how it does, good or bad.

How you can gain or lose

  • The price changes. If more people want to buy a share than sell it, the price goes up. If more want to sell, it goes down.
  • Dividends. Some companies pay part of their profit to shareholders. Many growing companies pay none.
  • You can lose money. Share prices can fall, sometimes a lot, and a company can fail entirely.

Where shares are traded

Shares are bought and sold on stock exchanges such as the New York Stock Exchange, Euronext Paris or the Tokyo Stock Exchange. Each company has a short code called a ticker.

Companies in this lesson

  • L'Oréal

    OR.PA · Euronext Paris

    The world’s largest beauty company: Lancôme, Maybelline, Garnier and more.

  • Estée Lauder

    EL.US · NYSE

    Prestige beauty: Estée Lauder, Clinique, MAC, La Mer.

  • e.l.f. Beauty

    ELF.US · NYSE

    Affordable cosmetics brand that grew fast with social media.

Examples only. Not a recommendation, and no endorsement by these companies.

Match

Match each term to its meaning

Drag a term onto its meaning, or tap a term and then tap the meaning.

Quiz

Check your understanding

  1. 1.You buy one share of a company. What do you own?
  2. 2.Why might a share price go up?

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