A share is ownership
Not a loan to the company.
All tracks and lessons
What a stock actually is
A share is a small piece of ownership in a company — with a claim on its future profits and its risks.
In this lesson you will
- Explain what owning a share means
- Name the two ways shareholders can benefit
- Understand single-company risk
A stock, or share, is a unit of ownership in a company. Owning one share of a company with a million shares means you own one-millionth of it — a claim on a slice of its future profits and, if it fails, a share of the loss.
How shareholders can benefit
- Price growth: if the company becomes more valuable, its shares may rise.
- Dividends: some companies pay part of their profits to shareholders.
The risks
Share prices move with company results, interest rates, the economy and investor mood. A single company can fall sharply or fail entirely; shareholders are paid last if a company is wound up.
Why companies sell shares
Selling shares raises money without borrowing. In exchange, the company gives up part of its ownership and future profits.
How this fits a plan
Individual stocks concentrate risk in a few companies. Many long-term investors hold broad funds instead, which spread money across hundreds or thousands of companies. This lesson explains how stocks work so the rest of the track makes sense. Education only — GetGuac does not recommend individual stocks.
By the GetGuac team · Editorial policy
Three ideas to keep
Returns are not promised
Profits and prices can fall.
Concentration is risk
One company can fail.
Do it in 4 steps
Learn the vocabulary
Share, dividend, market value.
See your existing exposure
Retirement funds often own stocks already.
Compare single stocks with funds
Concentration versus spread.
Decide your approach
With a professional if unsure.
Ownership in numbers
Made-up Example Co. with 10,000,000 shares.
| You own | Ownership share | Your slice of $5,000,000 profit |
|---|---|---|
| 100 shares | 0.001% | $50 |
| 1,000 shares | 0.01% | $500 |
| 10,000 shares | 0.1% | $5,000 |
Your slice of profit is not paid to you unless the company pays a dividend; it may instead be reinvested in the business.
Where this usually goes wrong
- Treating a stock like a savings account
- Putting a large share of savings in one company
- Investing money needed soon
Check whether your workplace retirement plan already holds stocks through a fund.
Tools and guides for this lesson
Quick quiz
1. A share represents…
2. Two ways shareholders can benefit are…
3. If a company is wound up, shareholders are paid…
0 of 3 answered
Puzzle
A company has 2,000,000 shares. You own 500. What percentage do you own?
Show the answer
0.025%
500 ÷ 2,000,000 = 0.00025 = 0.025%.