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What is a stock?
In short, a stock is an ownership interest in a company. When you buy a stock, you become a business owner.
Over the long term, the value of that ownership stake will rise and fall according to the success of the underlying business. The better the business does, the more your ownership stake will be worth.
Daydream time：Imagine you bought Facebook stocks 8 years ago, how much would you have in 2020?
A $1,000 investment in 2012 would be worth more than $16,000 as of Sep. 2, 2020, for a total return of around 1600%, regardless of the inflation effect. In the same time frame, by comparison, the S&P 500 earned a total return of just about 300%. The company, which went public in 2012, has a share price of around $295.
Difference between Stocks & Bonds
Stocks and Bonds are fundamentally different in a number of ways.
Bondholders are creditors to the corporation and are entitled to interest as well as repayment of principal. Creditors are given legal priority over other stakeholders in the event of a bankruptcy and will be made whole first if a company is forced to sell assets in order to repay them.
Shareholders, on the other hand, are last in line and often receive nothing, or mere pennies on the dollar, in the event of bankruptcy.
Stocks are inherently riskier investments than bonds.
Source: The Balance
Takeaway：Stocks are ownership stakes, while bonds represent debt.
What does it take to invest in stocks?
Investing in stocks is not rocket science. The only real characteristics shared among successful stock investors are basic math skills, a critical eye, patience, and discipline. Combine these with an understanding of how money flows and how businesses compete with one another, along with a dash of accounting knowledge, and you have all the mental tools needed to get started.
Although you don't need an advanced college degree to invest in stocks, selecting stocks is nevertheless an intellectual exercise. It requires effort, but it can bear many fruits. After all, investing in stocks not only leads to potentially higher returns on your investment dollars, it also leads to a greater understanding of how the world works.
Source: Morningstar, Investopedia, The Balance
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Comment(66)
I think every newbie needs to read this.
Newbies please read. Difference between stocks n bonds are also good information
this truly helped me a lot.
Very good
Looking it at to win prize
good basic
Good!
Really help for newbie
I agree every newbie needs to read it ,that's why I'm reading it,thank you
I like this short intro course, moomoo
Very nice explanation, thank you.
Patience and discipline are skills too. Not easy to cultivate!
Really helpful that moo moo is providing all these info.
Very simple and clear explanation
Great!
Owner or creditor? thanks for sharing
this gives a basic understanding or bond and stock
Love the explanation in laymen’s terms. Very helpful!
Now, I got a clearer understanding of what is Stocks and Bonds.
good detailed information .
Nice
Good message
thank you for the explanation 😊
Very helpful.
Good inform for newbie like me to know better what is stock
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It helps
Helpful
Good good for recap after many years.
Helpful overview
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Good to know!
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Great help for newbies!
Awesome
Very Nice. I'm glad to see that you added Training to the Daily Tasks. Plus, for whatever reason, I've not received credit for "Sharing Quotes" for about 4 months. It appears it stopped working.
Clear and pre ise
Thank you for the introductory class on stock n bond. Is indeed a great value reading,
The purpose of stocks, in my newbie starter view is ownership in something we believe in
I understand more now than I ever thought.
Groovy.
Great
So am i right to say, Bond when you buy it, it is like you are borrowing money to the company so they have to pay you back.
Stock you are buying to be part of the company so it loses, u lose. it wins , you win?
thank you!
thanks for the info
like it
Everybody need to understanding the different between bond and stock
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