What are stocks

Training 635 minuteswhat are stocks

You are 30 and work as a barista at a local cafe. The owner is opening a second location and offers staff a chance to buy shares. This is your first real look at what a stock is.

Training goal: Understand what you pay for when you buy a stock

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Situation

1. The cafe is split into 1,000 shares at $50 each. Yearly profit is $20,000. What do 10 shares give you?

A claim on 1% of profits and growth
A guaranteed income, like a deposit
A loan the owner must repay

2. Six months later a neighbor offers $80 for a share you paid $50 for. The cafe profit has not changed. Why the higher price?

The business got much better
It is pure luck
People expect growth from the new location

3. A friend says put all $3,000 into one famous company from the news. "It will definitely go up."

Put it all into that company
Buy a fund holding hundreds of companies
Stocks are a casino, skip them

4. The market drops 25% and so does your fund. The companies inside keep operating. Your job is steady and your cushion is intact.

Sell and save what is left
Hold and keep buying on schedule
Stop looking and stop contributing

What you will learn

A stock is a share of a real business, its profits and losses.
Short term, price follows emotion. Long term, it follows profit.
One company is a big risk. Hundreds in a fund spread it out.

Your real-life step

Pick a company whose products you use and look up its yearly profit. Think about what 1% of that business is worth to you.

Questions and answers

What are stocks in simple terms?

A stock is a small piece of ownership in a company. You share in its profits through price growth or dividends, and in its losses.

How do you make money from stocks?

Two ways: the share price rises, or the company pays dividends from profits. Historically most gains came from holding for many years.

Can you lose all your money in stocks?

With one company, yes: shares can go to zero in bankruptcy. A broad fund of hundreds of companies is very unlikely to go to zero, though temporary drops of 30-50% happen.

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Numbers are illustrative. A game, not financial advice.