What are stocks and cryptocurrencies?
1. What are Stocks?
Stocks, also known as shares or equity, are units of ownership in a company. When you own a stock, you possess a fractional ownership stake in that company. This means you have a claim on a portion of the company's assets, earnings, and voting rights, proportional to the number of shares you own.
Stocks are a way for companies to raise capital (money) by selling ownership in the company to the public. Investors, including individuals, institutions, and even other companies, purchase these shares of ownership, becoming shareholders.
Example:
Imagine you have a favorite pizza place, and you really like their pizza. The pizza place is doing so well that they decide to sell small pieces of their pizza business to other people. Each small piece you buy is called a "stock." When you own a stock, you own a tiny part of that pizza business.
Let's say you buy one stock from the pizza place, and they have a total of 100 stocks. That means you own 1% of the pizza business. If the pizza business does well and makes a lot of money, the value of your stock can go up. You can then sell your stock to someone else for more money than you paid for it, and that's how you make a profit.
2. What are Cryptocurrencies or Crypto?
Cryptocurrencies are like digital money, but instead of being controlled by a bank or a government, they are managed by a computer system using something called blockchain technology. Think of them as special coins or tokens you can use for online transactions.
Example:
Imagine you have a digital wallet on your computer or phone. In this wallet, you can hold cryptocurrencies like Bitcoin. When you want to buy something online, you can use your Bitcoin to pay for it. Just like with regular money, the value of Bitcoin can go up and down. If you bought some Bitcoin when it was worth $10,000, and it later becomes worth $20,000, you can sell it for a profit or use it to buy things.