Summary
Highlights
Buying a stock means becoming a co-owner of a company. When a new company requires capital, investors (shareholders) contribute money in exchange for shares. The number of shares owned determines influence in the company. For example, owning 500 shares out of 1000 makes an individual a major shareholder.
Shareholders are the owners, while executives (directors) are appointed to manage the company. The representative director is often the effective CEO. In large corporations, the owner and CEO are often separate, whereas in small businesses, they are frequently the same, known as owner-presidents.
Listed companies can trade their stocks on a stock exchange, undergoing strict review. Unlisted companies, while also having shares, do not trade them publicly, making it difficult for shareholders to sell their stakes. Many famous companies, like Suntory and YKK, are unlisted.
Stock exchanges are where shares are bought and sold through brokerage firms. The Tokyo Stock Exchange has categories like Prime Market (major companies), Standard Market (stable mid-sized companies), and Growth Market (high-growth potential companies) to differentiate companies.
Listing allows companies to raise funds from the market, increases their credibility and public awareness, and enhances transparency through regular financial disclosures.
Individual stocks (銘柄) refer to shares of specific companies like NTT or KDDI. Stocks are typically bought in units of 100 shares, meaning a single share price of ¥1,000 would require a minimum investment of ¥100,000.
Stock prices generally rise as a company grows and generates more profit, increasing demand from investors. However, stock prices are also influenced by future profit expectations and investor sentiment, ultimately being determined by supply and demand.
There are two main ways to profit from stocks: capital gains (売買益), which is the profit from selling shares at a higher price than bought, and income gains (インカムゲイン), which includes dividends and shareholder benefits received simply for owning shares. Day trading, which involves frequent buying and selling, is a less common approach; most investors hold for long-term growth.
When a company lists, the value of the stock held by the founder (owner-president) significantly increases, allowing them to sell shares for substantial profit as there are more buyers in the market.
Buying stocks signifies becoming an owner and investing personal funds into a company. If the company performs well, investors benefit through distributed profits or increased stock value. It's about being on the capital side, actively participating in a company's success.