What Do Stocks Represent?

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So you ask yourself, what do stocks represent? Many stock market investors have different opinions on this question, but one thing that all agree on is that stocks can represent many different things. Stocks are shares in a company, and they allow one person to benefit from the success or failure of that company Essay¬†Wall Street. For example, let’s say that Company X is developing new technology. The stock price of this company will rise because it is a good idea for people to use that technology now instead of waiting for it to be invented.

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Stocks Represent

Now, let’s say that Company X now offers dividend payments and a guaranteed stream of profits to all of its stockholders. All of the companies’ stockholders now own shares of ownership in a corporation and all of their future profits and losses will be based on the profits and losses of that corporation. Now, this is a good scenario for all of the stockholders, but what if Company X does not offer any dividends and continues to lose money? Well, all of those stocks of shares of ownership in that corporation will now be worth something less than what they would be worth if Company X earned its regular dividends and paid out regular interest payments on its debt contracts with the government and other creditors.

Final Words

In this example we just demonstrated that what do stocks represent? They represent future profits and losses, current shares of ownership in a corporation, and future income streams that depend on those same future profits and losses. Now, you might say that all of these are possible to realize, but how would that impact my financial portfolio? If I am holding onto stock shares and earning them, it does mean that I’m adding some positive cash flow into my portfolio. However, if I am continually losing money on interest debt contracts with a corporation, the effect of that will have a negative impact on my personal finances.