What are stocks? A student’s guide to the world of investing.

I am sure that most of us would have heard terms like “stock market” or “shares” or “Wall Street” in conversations around us. Sometimes we hear about them on the news, sometimes from adults discussing investments. Have you ever wondered what do these terms really mean? Have you ever thought why is that people want to deal in them?

The jargon can sound quite intimidating at first, but the more you get to know about them, the easier they become to understand. Through this blog, I will try to explain the simple concepts about stocks to know what they really mean, how do they work and why is it important to know about them as young students. What I will present in the blog is based on resources from the internet and what I have learnt through colleagues.

Definition of stocks

A stock is a type of investment that denotes your ownership in a firm or a company. So, when someone buys a stock, then we can say that she or he is buying a small part of that company. A stock can also be called a share. If that company does well, then the share also becomes more valuable. On the other hand, if the company is not doing well, then your share will also lose value. Let me show this to you through an example. Think about your favorite burger shop. If the owner of that shop wants to open more stores, he will need more money to do it. But instead of taking loan from a bank, the owner decides to sell pieces of the business. These pieces are called shares and people who buy these shares become partial owners of the burger shop.

Therefore, if you buy one share of that burger shop, you become the owner of a tiny piece of the company. This is what owning a stock means. Simple?

Reasons why stocks are sold by companies

All companies need more money to grow, build newer products, hire a greater number of workers and compete harder in the market. By selling stocks, they can gather more money. The first time a company offers the public to buy its stocks, is called an IPO or an Initial Public Offering. So, by selling shares, the company is able to raise money from investors without taking on debt or loan from an institution/bank. In return, investors (the persons who purchase the stock) get a chance to have a share in the future profits of the company. It is a win-win for everyone.

Reasons why people buy stocks

There are two main reasons why people buy stocks. First and foremost is to earn money or to make profit. How do they do that? In two main ways:

1. Through capital gains: If you buy a stock for Rs 100 and later sell it for Rs 150, you earn a Rs 50 profit. This profit is called a capital gain.

2. Through dividends: Some companies pay part of their profits to shareholders on a regular basis. This regular payment is called a dividend. However, only large and successful companies offer dividends, not every company.

The second reason why people buy stocks is to build their wealth over time. Mostly people invest in stocks for a long term, in the hope of their value growing over years. Historically too, the stock market has indeed helped people grow their savings faster than regular bank accounts. However, we must remember that this comes with more risk.

Defining a stock market

A stock market is the place where stocks are bought and sold. It is like a big marketplace for company shares. Some of the most popular stock markets in the world are New York Stock Exchange (NYSE) in USA, NASDAQ in USA (home to tech companies like Apple, Amazon, Google), London Stock Exchange (LSE) in the UK, Tokyo Stock Exchange (TSE) in Japan, Bombay Stock Exchange (BSE) in India. You must remember that one does not physically have to go to a market to buy stocks. Stock trading happens online through stock brokers or investment apps. Do you have friends or family members who do stock trading from home?

What affects stock prices

The prices of stocks are very volatile. They may go up or down nearly every day. Usually when a company makes more profits or launches a popular product, its stock price may rise. Global news about interest rates, inflation, conflict or unemployment can influence the market. Sometimes, emotions like anxiety or fear or excitement can cause people to buy or sell stocks promptly, which tends to move prices. If too many people want to buy a stock, the price of those stocks usually goes upwards. On the other hand, if more people want to sell it, the price of the stock tends to go downwards.

You must always remember that the prices of the stocks are not always guaranteed to go up. This is the reason why investing in stocks involves a lot of risk. The rewards of investing in stocks are things like -

• Higher potential returns. Over long periods of time, stocks usually earn more money than savings accounts in banks or financial instruments like bonds.

• Ownership in companies. One gets to be are a part-owner of companies one admires and uses (like Nike, Apple, or Disney).

• Compound growth. If one reinvests one’s earnings, then money can grow faster with time.

However, there are multiple also risks involved in investing in stocks, such as-

• Price fluctuations. Stock prices can change quickly based on news, rumors or business performance.

• Possibility of loss. One could lose some or all of one’s investment if the company performs poorly.

• No guarantees. Unlike a savings account in a bank, stocks do not promise fixed returns.

Experienced and smart investors try to diversify. This means that they begin to buy different types of stocks in order to reduce risk.

How do people buy and sell stocks?

The most common method of trading in stocks is through online brokers or investing apps. These platforms connect you to the stock market and give you the option to pick which companies to invest in, track how your stocks are performing and also help you to buy or sell shares easily. Some apps even allow students or beginners to create “practice accounts” using virtual money so you can learn how the market works without risking real money. However, you must always make sure to research and ask a parent or teacher before using any real investing platform. Thanks to technology, many platforms now offer fractional shares, which means you can buy a portion of a stock instead of a whole one. For example, if a single share of Reliance costs Rs 3,000, you could still invest Rs 100 and own a small piece of it. This makes investing in stocks more accessible to everyone, even students!

Why should you, as a student, learn about stocks?

While you may not have your own stock portfolio right now, but learning about stocks helps you understand the news better, make smarter financial decisions in the future, plan for long-term goals like college or travel or even retirement, avoid falling for financial scams or bad advice. Investing is undoubtedly, one of the most powerful tools for building wealth over time, and the earlier you understand it, the more confident you will be later in life.

Stocks are more than just numbers on a big flashy screen. They represent real companies, real ownership and real opportunities. While investing in the stock market has its own risks, it also offers a path to long-term financial growth. As a student, you may not need to worry about investing right now, but learning how stocks actually work will give you a strong foundation for future financial success. You do not need to be a trading genius or a millionaire to invest. You just need knowledge, patience and a willingness to learn. The earlier you start understanding how money works, the better prepared you will be for taking sound financial decisions in adulthood.