Stock simply explained

Jun 13, 2022 | Knowledge Stock simply explained

A stock or share is a security that represents a share in a public limited company In addition to shares, other important types of securities are bonds (fixed-interest bonds).

Oscar Leistikow

Table of contents

  1. What is a stock (security)?
  2. Why do you buy stocks?

What is a stock (security)?

A stock is a security that represents a share in a public limited company. In addition to stocks, other important types of securities are bonds (fixed-interest securities), certificates, funds, ETFs and warrants.

The easiest way to explain a stock is to use a fictitious example: Rendite Corp. is a public limited company. The founder of the company holds 100 percent of his company. This means that he still owns all the stocks in Rendite Corp.. However, he now wants to sell a stock of his company. You buy 200 of the 1,000 existing stocks. You now own 20 percent of the company. You are now a stockholder and co-owner of Rendite Corp..

Why do you buy stocks?

Owning stocks in Rendite Corp. gives you certain rights. Firstly, the right to have a say at the company's annual general meeting. Secondly, the right to participate financially in the company's success.
Oscar Leistikow

Written By: Oscar Leistikow

Oscar Leistikow holds a Master's degree in Controlling and is at home in the world of numbers thanks to his many years of professional experience in the finance department of a DAX-listed company. He is fascinated by the capital markets and is an enthusiastic private investor himself. His aim is to pass on his knowledge of shares and the stock market and to develop StocksGuide into a leading tool for private investors.