If you’re new to investing, you’ve probably heard people say things like “I bought stocks” or “the stock market is up today.” But what actually is a stock?
The good news is that stocks are much simpler than they sound.
What Is a Stock?
A stock represents a small ownership stake in a company.
When you buy a stock, you are purchasing a tiny piece of that business. If the company grows, earns more money, and becomes more valuable, your investment may grow too.
Think of it like this:
Imagine a pizza cut into thousands or even millions of slices.
Buying a stock means owning a very small slice of that pizza.
The more slices you own, the larger your ownership stake.
Why Do Companies Sell Stocks?
Companies sell stocks to raise money.
Instead of borrowing from a bank, companies can sell ownership shares to investors to help:
- Expand the business
- Hire more staff
- Build new products
- Enter new markets
- Fund future growth
Investors buy those shares because they hope the company becomes more valuable over time.
How Do You Make Money From Stocks?
There are generally two main ways people make money from stocks:
1. Share Price Growth
If you buy a stock for $20 and later sell it for $30, you made money because the company increased in value.
This is called a capital gain.
2. Dividends
Some companies share profits with investors by paying dividends.
If you own shares in a company that pays dividends, you may receive cash payments regularly just for owning the stock.
👉 Read my article about What is a dividend? to learn more.
Real Example: Buying One Share
Let’s say you buy one share of Google for $100.
Over time, the company performs well and more investors want to own the stock.
The share price rises from $100 to $120.
Your investment gain would look like this:
- Buy price = $100
- New price = $120
- Gain = $20
In this example, your investment increased because the company became more valuable and investors were willing to pay more for the stock.
However, this gain is only on paper unless you sell your shares.
If you continue holding the stock, the price could continue rising — but it could also fall again.
This is often called an unrealized gain, because you have not actually sold the investment yet.
Of course, stock prices can also fall — investing does not guarantee profits.
Are Stocks Risky?
Yes.
Stocks can go up and down in value — sometimes quickly.
That’s why many beginners avoid putting all their money into a single company.
Risks include:
- Company performance getting worse
- Economic downturns
- Market crashes
- Bad news affecting stock prices
- Emotional investing decisions
This is one reason why many investors prefer diversification.
👉 Read my article about Why Diversification Matters.
Individual Stocks vs ETFs
Many beginners ask:
“Should I buy individual stocks or ETFs?”
Individual Stocks
✅ Potential for higher returns
✅ More control over what you own
❌ Higher risk
❌ Requires more research
ETFs
✅ Instant diversification
✅ Lower effort
✅ Beginner friendly
❌ Less control over individual companies
👉 Read my article about What is an ETF?
Where Can Canadians Buy Stocks?
Canadians commonly buy stocks using investment accounts such as:
- TFSA
- RRSP
- FHSA
- Non-registered accounts
Popular platforms allow investors to buy stocks directly through brokerage accounts.
👉 Read:
Fresh Tip 💡
Be careful to look at fees before buying individual stocks.
Some of the big Canadian banks still charge up to around $10 per trade.
That means:
- Buy a stock = fee
- Sell a stock = fee
- Small investments can get eaten up quickly
For beginners making smaller purchases, trading fees can have a surprisingly large impact on returns.
Final Thoughts
A stock is simply a small piece of ownership in a company.
Stocks can help build wealth over time, but they also carry risk.
Start simple, learn gradually, and focus on understanding what you own before investing your money.
Remember: investing is usually more about consistency and patience than finding the next big winner.