What Is a Stock?

Imagine a pizza cut into 8 slices. When you take a slice, you are holding 12.5% of the entire pizza.

Just like this analogy, companies offer shares that anyone can purchase. When you buy a share, you own a slice of a real company: its factories, brands, cash, and future profits.

As the company grows and makes money, the company becomes more valuable to investors. Now people are willing to pay more for small "slices" of the company. Likewise, when a company doesn't perform well, the stock price drops. This covers the very basics of how stock prices fluctuate day to day.