Chapter 1. What Is a Stock? — Buying a Piece of a Company

Buying one share of Samsung Electronics — what does that actually mean? It’s not simply betting on a number going up or down. It means owning a tiny fraction of Samsung Electronics as a business.

1. Definition of a Stock

Companies need money to grow. There are two main ways to raise capital.

How Companies Raise Capital

구분	Bank Loan (Debt)	Issuing Stock (Equity)
Nature	Borrowed money — must be repaid	Invested money — no repayment obligation
Cost	Interest payments	Dividends (profit sharing) or none
Risk	Heavy burden on the company	Risk shared with investors
Relationship	Creditor — a business relationship	Shareholder — co-owner of the business

When a company issues stock, instead of borrowing money it gives away a portion of its ownership. Each unit of that ownership is called a share (stock).

Samsung Electronics has approximately 5.9 billion shares outstanding. Owning one share makes you 1 / 5,900,000,000th of the company — small, but it comes with voting rights, dividend rights, and residual asset claims.

2. Structure of the Stock Market

South Korea has two main official stock exchanges.

🏢

Large-cap Blue Chips

KOSPI

Korea Composite Stock Price Index. Home to Samsung, Hyundai, SK Hynix and other major corporations.

🚀

Mid-cap Growth Stocks

KOSDAQ

Korea Securities Dealers Automated Quotation. Focused on IT, biotech, and gaming companies.

🌱

Early-stage Startups

KONEX

Korea New Exchange. Reserved for SMEs and ventures. Retail investor access is restricted.

3. Two Ways to Make Money from Stocks

📈

Price Appreciation

Capital Gain

Buy at ₩10,000, sell at ₩15,000 — ₩5,000 profit. The most common form of return.

💰

Income

Dividend

A share of the company's profit paid out to shareholders in cash. Typically once or twice a year.

4. Stock Price vs Company Value

A high stock price doesn’t mean it’s a big company. Market capitalization is the true measure of size.

Market Cap = Stock Price × Shares Outstanding

Example:

Company A: ₩1,000,000 per share × 10,000 shares = ₩10 billion market cap
Company B: ₩1,000 per share × 100,000,000 shares = ₩100 billion market cap

Company B has a far lower price per share but is 10× larger.

5. Basic Trading Vocabulary

Term	Meaning
Buy (Long)	Purchasing shares
Sell	Selling shares you own
Order Price (호가)	The price you are willing to buy or sell at
Fill / Execution	When a buy and sell order match and a trade completes
Position / Holdings	The shares you currently own

🧠 Knowledge Check

[Quick Check]

Q. When you buy a share of stock in a company, what do you become?

① A creditor ② A shareholder (co-owner) ③ An employee ④ A regulator

Answer: ② — Buying stock makes you a part-owner (shareholder) of the company, not a creditor (who lends money).

Next: we decode the numbers you see every day on your trading app — open, close, volume, upper limit price, and more.

Stock Basics Ch1. What Is a Stock? — Buying a Piece of a Company