What is a Stock Market Security

Many people who are just starting to learn about the stock market feel a bit confused about just what is a stock market security. Here's a simple, easy to understand explanation.

Suppose you start a company with a friend. Each of you owns half of the company. And the company grows and grows. If you wish to sell a portion of the business, you can sell it on the open market to anyone who wishes to buy it. This is known as an Initial Public Offering, or IPO.

When you sell a portion of your company on the open market, ownership is divided into small pieces. Each small piece is one share of the company "stock". When the owners sell part of a company on the open market like this, they often create a large number of shares, such as 10,000,000.

That is the short answer to the question what is a stock market security. One of the challenges of learning about the stock market, or investing, is that there is too much information. Everyone has idea of what works and what stocks are going to go up.

Seasoned traders and investors know that a hot stock tip is almost always a bad idea. Investing takes time to learn about the market, and understand what moves a stock up or down. Most people who believe that they are investors are really just gamblers. That is why 95% of so-called investors lose money.

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