When a company wants to grow — open new locations, hire more people, build a new product — it needs money. One way to raise that money is to sell small pieces of ownership in the company to the public. Each one of those pieces is called a stock, sometimes also called a share.
When you buy a stock, you become a part-owner of that company. Not a big owner — if you buy one share of Apple, you own a tiny fraction of a massive company. But you own a piece of it. And if the company does well and becomes more valuable over time, your piece becomes more valuable too.
A simple example
Imagine a friend starts a bakery and sells 100 ownership slices to raise money. You buy one slice for $10. A few years later the bakery is thriving and each slice is now worth $50. Your $10 became $50 — just by holding on to your piece of something that grew.
That's the basic idea behind a stock. You're not lending money to a company. You're buying into it. If it succeeds, you share in that success. If it fails, you share in that too — which is why no single stock is a sure thing.
How do stocks make money?
There are two ways a stock can make you money:
Price growth
If the company becomes more valuable over time, the price of each share goes up. If you bought at $10 and it's now worth $50, you've made $40 per share — but only when you actually sell.
Dividends
Some companies share a portion of their profits directly with shareholders on a regular basis. These payments are called dividends. Not every company pays them, but many established ones do.
What about the risk?
Stocks go down as well as up. In 2008, the U.S. stock market dropped 37% in a single year. In 2022 it dropped 18%. Anyone who invested and panicked — selling everything when prices fell — locked in those losses permanently.
But anyone who stayed invested — who kept contributing and didn't touch it — recovered fully and then some. The S&P 500, which tracks 500 of the largest U.S. companies together, has never failed to recover from a downturn over a long enough horizon. Every crash in history has eventually been followed by a new high.
~10%
Average annual return of the U.S. stock market over the long run, before inflation. After inflation, roughly 7%. That's the number the calculator on this site uses.
This is why time in the market matters more than timing the market. The people who built wealth through stocks weren't the ones who bought at exactly the right moment. They were the ones who invested consistently over decades and didn't panic when things got rough.
Why this matters for you
For most of American history, the stock market was not designed for or marketed to Black families. Brokerage accounts required minimums that excluded working-class households. Banks in redlined neighborhoods didn't offer investment products. The financial industry's default customer was white and middle class.
The result is a gap that has compounded for generations. Not because Black families didn't work hard enough or save enough — but because the tools were withheld.
Those tools are available now. A brokerage account takes 10 minutes to open. Index funds let you own a piece of all 500 companies in the S&P 500 for the cost of a single share. The minimum investment at Fidelity is $1.
Your grandmother didn't need to pick the next Apple. She just needed access to the market — and a reason to believe it was for her. You have both.