Identification

Buying stocks or shares means you own a certain percentage of the company that issues them. If a person buys one piece of stock in a company with 100 shares available, they would own 1 percent of that company.

Function

Companies issue shares to potential buyers in order to raise capital to grow their business. Investors purchase stock because it generally gains in value over time.

Considerations

Take caution before diving into stocks, shares and other secured investments. Make sure you have enough money to put into the stocks and, at the same time, pay off other obligations, such as debt, where interest rate charges are sometimes greater than the return on a stock.

Strategy

Two main strategies exist to buy stock: actively buying each stock or letting someone pick stocks for you. For the new buyer, passive investing (where you buy stocks that mimic the entire market, but on a smaller scale) proves much easier and safer than active management mutual funds, which usually does not beat the market average.

Warning

Stocks lose and gain value continuously, sometimes in extreme values. Bear markets---where the average value of all stock goes down---occur from time to time and losses of up to 20 percent are not unheard of; companies can even go bankrupt and lose essentially all value.

Source:

CNNMoney.com; What is a stock?

Motley Fool (fool.com); How Do I Invest?