I'm terrible with economics' terminologies, so keep

It's almost that simple.

The company issues shares (aka stock) to fund some of its purchases, so that it doesn't have to take on so much debt.

When the company grows successful, it can return some money to its owners (of which you are one if you've bought shares in it). This is known as a dividend.

Alternatively it can buy back some of its own stock so that each remaining share is worth more. Or it can expand or take over other companies, which can have a similar effect.

>>1648031
Holy shit that's a fucking horrible explanation.

You buy stock in a company when you want to own a piece of the company. If the value of the company goes up, your share value goes up. You can sell shares to get actual cash to spend. You do get a dividend, but fuck that shit - who wants a dividend? Warren Buffett has never paid a dividend because it is better to plow the profits back into the company and drive the stock price higher.

>>1648031
So it's like an interest rate?

I give you 5$ to help you out, but after 3 months, you give me back 5.50$?

>>1648064
I don't get what "own a piece of the company" concretely means.

Why would someone want to buy shares after anyway?

Let's say I buy an action/a stock for 5$.
10 months later, that stock is worth 10$.
Is my profit ONLY coming from the potential sale I can make?

If I'm stuck with that action/stock that no one wants to buy, I'm practically stuck with a 10$ I can't use?

I still don't get how companies make profit on this.

>>1649001
If nobody wants to buy it's not worth $10

>>1649001
Companies make profit the moment they issue new stocks

>>1649324
Well actually they dont make a profit, Sorry. They just get cash without really increasing indebtedness

>>1649001
Picture stocks as the company itself chopped up into tiny pieces. The more of these pieces you own the more of the company you own. Owning pieces of the company make you a stakeholder, now you can't exactly boss these people around even technically you're an "owner" but the more you own the more pull you get at the stakeholders meeting (meeting of the owners) I'm kinda drunk so my answer might be retarded but I tried.

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>>1647755
>Is it really as simple as that?
>I still don't get how the company does profit off of that.
it works because when a company issues shares it uses the money it gets from stock shares to finance the company, (they use the money for advertising, designing a more realistic dragon dildo, or use the stock money to pay for extra gas in their trucks, whatever)

the catch is that you dont know if whatever the company is doing with your money is "good"(profitable) or not, is that farming company whose stock you just bought really buying more acres of farm land with your stocks money? or is he buying his one way ticket to the bahamas with it?

if you want a good historical explanation, just look up dutch tulip mania, or something along those lines

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>>1647755

or incase youre too lazy...

>>1649370
https://en.wikipedia.org/wiki/Tulip_mania

In the Northern Hemisphere, tulips bloom in April and May for about one week. During the plant's dormant phase from (Northern Hemisphere) June to September, bulbs can be uprooted and moved about, so actual purchases (in the spot market) occurred during these months. During the rest of the year, florists, or tulip traders, signed contracts before a notary to buy tulips at the end of the season (effectively futures contracts). Thus the Dutch, who developed many of the techniques of modern finance, created a market for tulip bulbs, which were durable goods. Short selling was banned by an edict of 1610, which was reiterated or strengthened in 1621 and 1630, and again in 1636. Short sellers were not prosecuted under these edicts, but their contracts were deemed unenforceable.

Imagine you want to start a lemonade business.

You have what you need, and start selling. Business is booming, and you earn money.

Later you see that there could be more stands all over town, and you decide to open more. However, nobody will give a ten year old a loan, so therefore you issue stocks, that you sell to investors. Now your company has more cash, but your shares are now only x percent of the total shares.

When you have opened all the possible stands, the company has an excess of cash flow coming in. This cash can be given to the investor as a sort of investor's salary, called dividend, or it can be used to buy the shares back from investors willing to sell. Both are good for you, since you either get cash or a larger portion of the company.

Or.. It could be used for diversification. The company might buy other companies (e.g. a coffee shop) so that it can earn money even if it's cold.

However, how a company handles excess cash is often more important than how much cash it can make, and can make great businesses into bad investments.

>>1649034
Different fag here with another noob question.

What is the mechanism by which a stocks price is calculated? Obviously some guys are negotiating the price that those shares are being currently traded at, and that becomes the share price that anybody buying that stock at that moment has to pay. Who decides, though? And for that matter why couldn't an individual stockbroker decide to set their own price if people were willing to pay it?

>>1649396
If you google a stock, for instance Apple Computer (AAPL) it will give you three numbers. Ask, Bid and Last. Last is the last recorded transaction, Ask is the lowest offered price at the moment Bid is the highest offered price at the moment. I can Ask for 120/Share like you suggest, but it doesn't mean I will get it.

>>1649001
>So it's like an interest rate?
No. If you're lending them money then it's a bond not a stock.

If you buy shares, you own a fraction of the value of the company. Therefore you own a fraction of the company's profits - though what is done to return that to you is up to those running the company.

Owning a fraction of the company usually also means you get a say on how the company is run. There are shareholder meetings where shareholders have the opportunity to put questions to the board of directors and vote on key decisions.

>>1649396
If you want to buy shares on the stock market, you can either specify you want to buy them immediately, in which case you take whatever price people are willing to sell them at, or you can opt to buy them when the price falls to the amount you specify.

If you want to sell shares on the stock market, you can either specify you want to sell them immediately, in which case you take whatever price people are willing to buy them at, or you can opt to sell them when the price rises to the amount you specify.

The quoted price is usually the price at which the last trade occurred.

>>1649351
t. really tripped on acid here

your disclaimer at the end made me laugh at my computer for five minutes

>>1649432
Did I fail that badly?

>>1649507
You didn't fail at all, it's just a funny thing to read after an explanation of a financial terminology.

As good a thread to ask as any I suppose. I have a bit over $500k coming to me, and I was wondering something. Let's say I toss $100k or $150k of that into an account for trading. Find a company on the exchange that doesn't have big swings, around $5 a share or so. Say that the stock routinely goes from 10/15¢ down from opening price up to 10/15¢ over opening price. So, buy say 5k shares on the dip, sell once you get that 10/15¢ or more rise, then sell, pocket $500 or more profit. There has to be hundreds of companies that would fit this criteria, so youcan rotate through and not single out one stock. Is this illegal in some way?

>>1647755
The float is the total number of shares issued for a company. The number of shares you own divided by the float (x100) is the percentage of the comany you own. If that percentage is > 50%, congratulations, you own the company and can appoint your self chairman, CEO etc. Stock is equity, or shared ownership. Bonds are debt, or loans made to companies by investors. If a company goes bankrupt, bondholders get first dibs at getting their money back, so they tend to be lower risk / lower reward. Dividends are just profit sharing with stockholders as an incentive to own shares.

Stocks (and bonds for the most part) are priced by what people are willing to buy and sell them for at any given moment. Just like going to a farmers market where many vendors are selling apples, the apple prices are not "controlled" per se, but determined by supply and demand. Fewer apples available with more willing buyers = higher price and vice versa. Stocks are priced extremely precisely because the pricing is based off of many thousands of transactions happening in across the globe and the data is aggregated by the exchanges. This proliferation of information about sales makes stock pricing one of the most precise pricing systems on the planet. Without the exchanges and free flow if information, you might buy a stock (or piece of fruit) for $5 when two towns over it is selling for $20.

>>1650000
Quads checked. Not illegal, but it is also not as easy as this. Stocks do not simply oscillate between prices predictably, it is far more complex than that. Every time you buy or sell, someone gets paid, regardless of whether you made or lost money. A $500k windfall would probably make talking to a professional financial adviser a good idea, but a good start is pay off debt first, then buy housing for yourself, then invest the rest. Trading a lot like you suggest is a bad idea for 99% of investors.