WTF is a stock anyway?

It’s OK if you don’t know what a stock is. Most people don’t.

Stock = Chicken
Dividends = Eggs

A DIVIDEND is just a fancy way of saying CASH.

If a CHICKEN makes a lot of EGGS, the CHICKEN will be valuable.
If a STOCK pays high DIVIDENDS, the STOCK will be valuable.

The STOCK MARKET is where all the chickens are.

Some chickens suck at laying eggs. These chickens are cheap. Think Sears & Kodak. They were once good at laying eggs but for right now, they suck at laying eggs. So their stock is cheap.

Some chickens are great at laying eggs. These chickens are expensive. They give their shareholders lots of DIVIDENDS. Think Apple & Disney.

Then there’s a 3rd kind of chicken that complicates things. These chickens don’t lay any eggs. But they’re still expensive. WTF? These chickens are expensive because someday we think they’ll lay lots of eggs. Amazon and Tesla have never paid a dividend. Instead they hold onto their profits and reinvest them back into the company to make themselves bigger and better. We’re hoping that one day, when they’re super successful, they’ll start laying lots of eggs and pay us big dividends.

EXAMPLE
You buy one share of Disney stock for $100.
You are now an owner of Disney.
Disney makes a big movie called the Avengers.
Everyone goes to watch the Avengers and Disney makes lots of money.
At the end of the year, Disney gives you your portion of the profits (a dividend).
After you receive your big dividend, people are impressed.
A lot of people believe that Disney is going to keep making big movies.
So Disney stock goes up in value from $100/share to $110/share.
Not only has your chicken given you some eggs but now the chicken is also more valuable.

Boomshakalaka! Welcome to the stock market.