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In today's market it is incredibly important to have a good understanding of the Stock Market, investing, and stocks. Stocks may seem like a completely foreign object, but they are actually quite simple to understand. Stocks are the pieces of ownership in a company that can be bought and sold as investments.
When a company is formed and goes public, the company is made up of the money that people have put into it - its capital. If you divide that company into equal pieces you have shares or stocks (the words are interchangeable in most cases). People can buy or sell or trade these stocks and have ownership in the company. If you own five shares of a ten-share company you now have half ownership of the company.
You pay for your stocks and then hope the company's value goes up, as it will make selling your stocks easier and give you a 'return' or profit. This is where the phrase 'buy low, sell high' comes from. When you buy your stocks at a good low price, then sell them when the asking price is much higher, you will see a large profit on your stock.
Your investment portfolio will likely have a large amount of stocks in it. Today people are advised to diversify their portfolio, partly by buying stocks in different industries. In the past people would just buy in one type of business (dot-com businesses, for example), but when that industry would suffer (the dot-com bust) they would lose a lot of money. This is because the value of their stocks went down and they couldn't make a profit when they sold them.
Trading on the stock market requires some research and foresight. You need to have an idea of what to expect, and also be able to weather the storm when the stocks are going down. A stockbroker can help with this, as they study the stock market and work with you to buy and sell profitable stocks. You can make a fair amount of money if you 'play' the market well, but beware of stock market crashes as well. This is when everyone is losing money and selling their stocks, which drives prices down and means less profit for all. Stocks can be not only a great investment, but also a good way to enjoy making money - just be sure to put in the time necessary to be successful.
Wiki User
∙ 13y ago
Jordan Huang
Stocks are ownership of a company. There are many benefits to owning them. To understand them further, we need to get rid of some misconception first. For a detailed answer, look at the geeky investor blog online.
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