What are stocks and how do they get created?
What is the Stock Market?
What is a market in general?
As you know, a market is where sellers and buyers come together to exchange goods and services for MONEY.
The stock market is the same. When we look at the stock market, we are looking at a macro picture, a picture of a MARKET for the WHOLE COUNTRY. We are looking at the market of Canada, of America, of England or South Africa, etc. We are looking at the countries’ economies.
Just imagine yourself walking into a very big market and in that market are stalls upon stalls, labeled Coca-Coca, Apple, Google, Walmart, General Mills (Cereal’s company), Tiffany, Nike, Amazon, Ford, Disney and everything else. Yes, you are walking into the USA’s stock MARKET. All the sellers are shouting out for you to come into their stall to buy something from them.
What is it that the sellers in the stock market want to sell to you?
They want to sell you a piece of ownership (stocks or shares) not an ice-cream or a vacuum machine. They offer you a chance to own part of those companies.
Why would you want to buy a piece of an ownership?
Just think about it for a minute, if you were going to invest in your friend’s business, you want it to create an income, right? Even more so, you want it to generate a profit for you and you can bring that profit home. So if you are going to buy a piece of ownership of a company, you want that business to bring in profit and increase that profit every year. Otherwise, what is a point of getting into a business!
Watch the video for an easy example of how stocks get create! From zero to IPO