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In parts one through three of my primer course on stocks, I defined the stock of the business as the original amount of money that went into founding it. I wrote that businesses divide stocks into shares, which can be bought or sold to shareholders, who are people who own one or more shares of stock and therefore “share ownership” of the company. I wrote about stock brokers who are people that will charge you to arrange the purchasing or selling of stock. Now a bit buying and selling stock.

As far as financing a purchase of stock, there are two ways to do it: purchase stock with money that is currently in the buyer’s ownership, or by buying stock on margin. When you purchase stock on margin you are buying stock with money that is borrowed against the stocks in the same account. In other words, you use the stock you already own as collateral to guarantee that you can repay your loan. Otherwise, the stockbroker can sell the collateral to repay the money.

Selling stock works pretty much the same way as buying stock. Generally, the investor is going to want to buy low and sell high. After a broker takes out his fee for arranging the transfer of stock from the seller to the buyer, the seller has a right to collect all of the profit that was left over.

The price of a stock will fluctuate with the theory of supply and demand, supply being the number of shares that are offered for sale at any one moment, demand being the number of shares investors want to buy at that exact same time. When buyers who want to purchase stock outnumber sellers, the price will grow. Eventually, sellers will see how high the stock is being sold for and start to sell their stock, or buyers will leave and equilibrium will be achieved between sellers and buyers. When sellers outnumber buyers, the price falls. Eventually buyers come back in or sellers leave, and equilibrium is again achieved. Therefore, the value of a share of a business at any given moment is determined by all investors voting with their money.

Of course, all of this doesn’t explain how people decide the maximum price at which they are willing to buy or the minimum price at which they are willing to sell, people’s buying and selling habits, or what stock will be more valuable when. People spend lifetimes trying to figure that out, it’s still up for debate, and if I knew, I wouldn’t be here typing about stock, I’d be on my yacht! But I hope that my primer course on stock was at least a little enlightening.

Mallory Megan works for Rapid Recovery Solution and writes articles on medical collection agencies. Also published at Stocks For Beginners Part Four.

In parts one and two of my primer course on stocks, I informed you that the stock of a business represents the original amount of money that went into founding it. Businesses divide stocks into shares, and each share represents a portion of ownership. I let you know about shareholders, who are people or companies that own one or more shares of stock in a joint stock company and “share ownership” of the company. I told you that they have special privileges depending on the class of stock they own, and that they will use their shares as votes in the election of members of the board of directors of the company.

Even if you owned fifty percent of a business’ shares and thus own fifty percent of a business, you do not have the right to utilize that business’ equipment, materials, building, or other property. This is due to the fact that the company is considered a legal person that owns all of its assets itself.

Despite the fact that owning shares means part ownership of a company, it doesn’t mean responsibility for liabilities. If a business goes under and has to default on loans, the shareholders will not be held liable in any way. However, when it comes time to repay loans and debts, the creditors must be paid first, often leaving shareholders with nothing.

Shares of a company have the capacity to be transferred from shareholders to other parties by sale, and stock markets have been created for trading shares and other derivatives. Despite the fact that there are various methods of buying and financing stocks, investors will typically be represented by stock brokers, people who buy and sell shares of a wide range of companies for a broker’s fee.

Stock brokers can be full service, or discount. Full service brokers will charge more per trade, but offer advice when it comes to investment or personal finance. Discount brokers will offer little or no advice but charge less for trades. A third type of broker would be a bank or credit union. Another way to buy stock is to purchase the stock directly from the company itself. If you own at least one stock, most businesses will allow you to buy shares directly from the company. To Be Continued In Part 4.

Mallory Megan works for Rapid Recovery Solution and writes articles on credit collection agencies. This article, Stocks 101 Part Three has free reprint rights.