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Stock Market Basics

by Andrew Zimmerman

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Stock Market
Basics
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By Mr Zimmerman
What is a stock?
A small piece of ownership in a company that is bought and sold over a market each day.
How does the stock market work?
The U.S. stock market is open from 9:30-4:00 Monday through Friday. Individuals and institutions can buy/sell stocks during this time and most of these transactions are now done online through brokers like ETrade and Fidelity (a sample portfolio can be seen in Figure 1.1).

When a person wants to buy or sell a stock, they simply get online, input the number of shares of a particular company that they want to transact and then complete the order. There are two ways of buying/selling stocks, including using a market order or a limit order. A market order is when someone buys/sells shares of a company at the current price. On the other hand, a limit order is when someone buys/sells shares a price that they have determined is reasonable. For example, Jane wants to buy a share of Amazon, which is currently priced at $3,440, but she is only willing to pay $3,000 for the share. She has two choices: To spend more than she wants and buy the share at the current price; Or set up a limit order to purchase the share if it ever drops to her desired price of $3,000. It is possible that shares never drop this low, but if they ever do, Jane can take advantage of the lower price without having to constantly monitor the stock market. The manner in which an individual invests in the stock market is entirely up to him/her, but the fundamentals are the same.
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Figure 1.1
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Figure 1.1
Discussion Questions:

1. Explain how someone can buy or sell a stock?
2. What is the difference between a market order and a limit order?
What companies sell stock?
How do you make money?
Some examples of companies on the New York Stock Exchange are the following:

Alphabet (Google)
Amazon
Facebook
Boeing
WalMart
Uber
Microsoft
Johnson & Johnson
3M
Pepsi
McDonalds
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