When you own shares of stock in a publicly owned company, you are referred to as a shareholder. Shares are fractional ownership stakes in a company. When you own a business as an individual, you are a 100 percent owner. Publicly owned companies often have thousands of shareholders who each have a partial ownership stake.
Buying shares of stock in a company is a common investment strategy. You get the investment advantages that come with owning a company but share the risks with others and don't have to take an active role in leading the company. To make money in stock investing, you typically buy shares at a given price and hope they appreciate in value. Then you sell at some point and make profits. You can also earn dividend income when companies pay extra cash to shareholders. Shorting stocks is a less-common strategy where you essentially invest with the belief share prices will fall.
Individual shareholders typically buy and sell stocks in an open stock market. In the United States, the NASDAQ and New York Stock Exchange are the major listing services that manage stock trades for major public companies. They have open market exchanges that open at 9:30 p.m. Eastern time most Mondays through Fridays and close at 4 p.m.. Some large institutional companies can buy and sell shares of stock on behalf of clients during pre-market and after-market trading hours.
There are two basic approaches you can take to trading and managing your stocks. Historically, many shareholders relied on stock brokers or professional traders to manage their accounts. The costs of using professional brokers are typically higher because you pay commissions to them for managing your account. Since the late 1990s, growth in self-managed online trading brokerages has allowed more individuals that manage their own stock investing. You can often find a brokerage that allows trades for less than $10 per buy or sell. Some banks even offer their top customers a certain number of free trades each year as part of a broad banking portfolio. Self-management may seem more risky, but costs are lower and individuals can usually find good research tools online.
Other Stock Considerations
The price movement of shareholder stock is influenced by a lot of economic and company factors. When a company announces positive news that leads investors to expect growth in company revenue or profits, share prices tend to rise. Negative news can lead to swift or prolonged declines in share price value. Economic factors such as interest rate announcements or industry upturns or downturns can also affect related stocks. Long-term shareholders generally buy stocks that either provide dividend income or have a strong likelihood of continued growth over time. Short-term traders try to buy discounted stocks affected by various market conditions and earn quick profits based on momentum buyers driving prices higher.
Neil Kokemuller has been an active business, finance and education writer and content media website developer since 2007. He has been a college marketing professor since 2004. Kokemuller has additional professional experience in marketing, retail and small business. He holds a Master of Business Administration from Iowa State University.