Unit 2 · Level 1 · The instruments
Stocks: owning a slice
Buy one share of a company and you own a real slice of the business: a claim on its factories, brands and future profits. If the company thrives, your slice becomes more valuable, and many companies mail part of the profits to owners as dividends. A stock is a piece of an actual business with customers and cash flowing through it, not a lottery ticket or a line on a chart.
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What you get asked
What are you actually buying when you buy a share?
Shareholders are owners, not lenders. That's why shares come with voting rights at shareholder meetings, and why their value tracks how the business does.
A cash payout that a company distributes from its profits to shareholders is called a ___.
Dividends are the owner's share of profits, often paid quarterly or yearly. Not every company pays one; many reinvest all profits to grow instead.
Match the stock-market term to what it means
The exchange is just the marketplace; the value lives in the businesses themselves.
In what two ways can owning a stock make you money?
Price gains plus dividends make up your 'total return'. Reinvested dividends quietly supply a large share of the stock market's long-run growth.
What's the honest downside of owning a single company's stock?
Owners are last in line if a company collapses, but you can never lose more than you invested. This single-company risk is why the next lessons pile on diversification. 🐜
The rest of this unit
Stocks, bonds, funds and cash: what you're really buying.