Demystifying Stocks: What Are They and How Do They Work?

I got a great question into the show the other day. Listener asked this said, Ralph, stocks sounds so complicated. Are they really just for Wall street experts? I feel lost when people talk about them.You might be listening right now. You're like, Ralph, I am tuned out as well. As soon as I hear the word stocks, I just lose it. But here's the good news in all this.Stocks are actually pretty simple. And today on the show, I want to break it down in really simple terms.I want to talk about what a stock is, how stocks work in just plain English simple terms, and how they can actually help you build long term confidence. So if you've ever been confused with stocks, this is the show for you.This is Financially Confident Christian, your daily dose of gospel, grounded insight and faith driven tips to help you break the cycle of financial shame with confidence. Hi there. Welcome to Financially Confident Christian. I'm Ralph and I'm super excited that you've chosen to join me today.Now, if you missed yesterday's show, we talked about investment horizons versus long term versus short term and we talked about how to select the best option for your situation. If you missed any of our shows, I want to encourage you.You can go right to financiallyconfidentchristian.com and you can see our entire episode of prior shows.Now listen, for decades I've sat with families, I've sat with small business owners, and I've sat with individuals who really felt intimidated by the word stock. Soon they heard the word stock. They're like, Ralph, I'm lost. I have no idea what you're talking about. I've seen their eyes glaze over.I've seen them get lost in all the jargon. But at the same time, and this is the really reassuring part, I've seen their confidences rise.It was awesome when they finally understood stocks in very simple terms. Because here's the truth truth bomb. Right now you don't need a finance degree. You just need some clarity. And I remember one particular story.This young dad came in to meet with me and he said, Ralph, I really want to get started in investing in stocks. And I said to him, okay, here's the simplest analysis I can give you. Imagine you're at your favorite pizza shop. He's like, man, I love some pizza.I say, me too. I can eat some pizza. And I said, but imagine your favorite pizza shop decides to sell slices of ownership. Just picture that pizza in your head.And that pizza shop says, slice is a stock ownership in that company. Well then when you buy one slice, you own a piece of the shop. You own a piece of that whole pie. It's funny, he smiled back at me and said, that's it.That's all that stocks are. I said, yes, that's exactly what it is. It's really that simple. So let's break it down a little further.The first thing I want to tell you, real simple terms, a stock is simply ownership. When you buy a stock, you literally own a piece of the company. Think about that pizza. You own a piece of that pie.So if the company grows, if the company becomes more profitable, your piece becomes more valuable. But here's the other side of that. If the company struggles, guess what, your piece might shrink. Yes, you might lose your money.So that's where we have to start. Second thing you might be saying, Ralph, okay, that's great, but why would a company want to sell stock in their company?Well, here's the reason for a very simple terms. Companies sell stock to raise money generally.Maybe they want money to expand, maybe they want to develop new products, or maybe they just want to hire more employees. Maybe the guy running the pizza oven says, look, I'm tired of working 80 hours a week, Ralph, I've got to bring somebody on.Well, one of the ways you can do that is actually sell ownership in your company. So when you buy that stock, when you buy that piece of pizza, you're partnering with that company.You're partnering with them in their idea or their anticipation of growth. So then you're saying, okay, I get it, Ralph, I own a piece of the pie. They're selling it because they want to grow. But how do I benefit from that?Well, here's the real simple way you benefit from it. If the stock price goes up, which it can, if the business expands, you make more money.In addition to that, a lot of companies pay what's called a dividend. That's actually a cash reward that they pay you, maybe quarterly, sometimes annually, for being a stockholder in that company.It's really that simple. You own a piece of the pie. They're doing it because they want to raise money and then they pay you or the stock appreciates or grows in value.And here's why it's really so important to understand stocks. They have a huge long term advantage. And this way. Ever listen to market gurus or those financial analysts on the tv?History has shown decade after decade that stocks create wealth for ordinary people just like you. Yes, they do bounce up and down. You have to understand that. You got to have a stomach for it.I talked about a little Bit about that yesterday in your risk tolerances. But over the long run, you can look at graphs and see this. They consistently have grown.Now, you know I talk about Bible and I talk about faith on this show. So let's tie this into the scriptures. Let's look at the book of Ecclesiastes, chapter 11, verse 2. It says this, invest in seven ventures. Yes.In eight, you do not know what disaster may come upon the land. And I thought that was perfect for today's explanation. Really simple, plain English.I have people say to me all the time, Ralph, I love listening to your show because you put it in terms that I can understand and see. Even the Bible in the book of Ecclesiastes. When it talks about investing in seven ventures. Yes. In eight, it's teaching us diversification.Well, stocks do exactly that. You don't buy all the same stock in the same company. If that pizza shop decides to go belly up, you might own something else.You don't put all your hope in one place. You spread it out wisely. So that's my quick 1, 2, 3 on stock ownership. How about we pray together?Father God, we just thank You for reminding us that wisdom often comes in really simple terms. So Lord, help us to see stocks not as something scary, but Lord, help us to see them as an opportunity to steward wisely.We ask that You would give us patience to think long term. Give us faith to trust in Your provision, Lord, and most of all, give us discernment to invest with peace. And in Jesus' name we pray this. Amen.Listen, if stocks have ever felt mysterious to you, I want to help remove that fear. I just finished writing my third book. It's called How to Become a Financially Confident Christian.And I would love to share that book with you absolutely free, no strings attached. Just go to this website, go to financiallyconfidentchristian.com/becoming you put your name, your email address in there and bang.You can get a copy of my book absolutely free. You download it right from there. It's filled with really simple truths to help you grow both your faith and your finances.That's what I'm all about here, building your faith and your finances. Now, thank you for joining me today. Now don't forget to join me tomorrow. On tomorrow's show, we're going to talk about bonds.Yes, not Barry Bonds, but investing in bonds, the safe bet for your portfolio. Because the truth is stocks bring growth, but bonds bring stability. So you don't want to miss tomorrow's show.And together we can work to balance that portfolio out together. Make sure you don't miss tomorrow's show. Now, today, I want to encourage you, go out there and be that financially confident Christian.I believe in you. But more importantly than any of those things, God believes in you. Stay financially savvy, God bless you, and you have a great day today.