What Is a Share?
Buying a share means owning a small part of a company.
1 out of 100 shares
Imagine a company divided into 100 equal shares. If you own 1 share, you own 1% of the company. This is a simplified example — not every company is structured exactly this way.
What people are hoping for
People may buy shares because they believe the company may grow, the share may increase in value, or the company may pay dividends.
Shares can also fall in value. You can lose money. Owning a share is never a guarantee of growth.
Share price
The price of a share changes as people buy and sell shares, and as expectations about the company's future change.
Dividends
Some companies share part of their profits with shareholders through dividends. Not every company pays them — it depends on the company.
5 out of 100 shares
A pretend company has 100 shares. If you own 5 shares, what percentage of the company do you own?
5%.
If the shares become more valuable, what might happen to the value of your investment?
It would go up. But the reverse can also happen — if the shares become less valuable, your investment falls too.
This lesson should establish ownership as a concept, rather than encourage your child to buy individual shares.
Where to next
More on companies and investing.