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The first step in understanding the way the stock market works is to know the meanings of the basic vocabulary words.words such as shares and equity are frequently exchag.even though they may be used in place of one another they still have different meanings.in reality when buying stock of a company a person is actually buying ownership of a piece of that particular company.a person can say that he owns stock in coca cola.this could mean that you own a tiny part of the coca cola company.

the number of shares that you have give an idea of the amount of company that you own.it is possible to hold just a single share of stock as well as one hundred shares.  The more shares of stock you have, the bigger the piece of the company that you own.  

when talking about stocks or shares the word equity usually also comes up.a company normally has two options when looking to raise capital , this helps in understanding equity.  The first way is perhaps the most familiar to consumers because it is the option to go into debt.an alternate way is to raise finance through equity.debt is financed through the selling of portions of the company in the form of shares.the financing of debt is carried out by letting investors purchase shares and using the money generated from those sales to pay off debts.when shares of stock are bought then it means that investing is being carried out in the equity of the company.  

Investors take the risk that the worth of their stock will increase beyond the price they paid for it.profits can be earned by selling shares to other investors once the value goes up.profits on stocks have no limit and they continue to grow as long as the value of the stock increases.a risk is always present that the share will either increase or decrease in value.  When that happens, investors lose their investment.  

bond is another word that is used when discussing investments.financing through debt is carried out when a company issues bonds.by buying bonds people are actually lending money to the company and the bond acts as a contract that gurantees that the company will repay the money on a set date.Less risk is involved with the purchase of bonds but the potential profit margin is also reduced when compared to buying stock.  The profit on bonds is a predetermined amount of interest.  

the value of any given stock is taken by the ecnonomic principle of demand and supply.the price of the stock will go up if it's demand is high and many people are willing to buy every share that is becoming available.when people are not willing to buy shares of a company then it usually results in the stock dropping in value.

This is a basic overview of stock market vocabulary.  For a more in depth look, visit Traders International.