Stocks are a piece of cake

When people talk about the market, they're usually talking about stocks. But what are stocks? Picture this: You're at a party and someone brings out a giant cake and slices it into equally sized pieces. Each piece represents a percentage of the whole cake.

Now imagine that the cake is a company that was sliced into parts. Each part represents a piece of ownership known as a share. And the company sells those shares on a stock exchange, which functions kind of like a stock supermarket. There are many different exchanges that function together as a network; combined, they are usually referred to as the stock market. Only people called brokers are allowed to directly buy and sell shares of stock. But anyone can then buy stocks through a broker, like Fidelity.

When you buy a share, you become part owner, or shareholder, of that company. Each share of a stock is worth a certain dollar amount that changes throughout the day as stocks are bought or sold in real time on stock exchanges. Unlike the value of a piece of cake, which changes immediately upon taking a bite.