You’ve more than likely heard of the stock market, and been intrigued by it. Most people don’t know much about it other than you invest money to make money. But it doesn’t always work out, does it? You can’t just invest money willy nilly and expect to be a millionaire. This guide will help even total beginners get a better understand of this market:
The Anatomy of a Stock
A stock is basically a share of ownership in a company. If you are a shareholder of the company’s stock, then you have a claim in everything the company owns. You also own a chunk of the company’s profits, depending on the amount of stock you have. These will be paid to you in the form of dividends.
Why Stocks Exist
It might not seem clear to you why stocks exist right now. That’s ok! Think of it this way: all companies need to raise funds at some point. They can borrow funds or sell part of their company, which is known as issuing stock. Companies issue stocks to raise funds, it’s as simple as that!
How You Trade Stocks
The majority of stocks are traded on stock exchanges, which are the places buyers and sellers meet up and then discuss a price. The New York Stock Exchange is one of the most popular places to do this. You may also ask the best online stock broker to help you in such endeavours.
To trade stocks you need to sign up for a brokerage account. The broker you use should be covered by the Securities Investor Protection Corporation. This protects your assets if one of the firms you’re working with should not succeed.
Bear in mind that as a shareholder, you aren’t guaranteed a return on your investment. You may earn a lot if the company you’re working with is successful, but you could also say goodbye to your whole investment.
Don’t worry: if a company isn’t able to pay its debts, you aren’t liable. Even if you’re a shareholder of a company that goes kaput, you won’t have to lose your personal assets. The amount you paid for your stock is all you stand to lose.
Changing Stock Prices
You probably realise that stock prices change all the time. But what makes them change this way? The current price of stock shoes what investors seem to think a company is worth. As you can imagine, there are several factors that can change an investor’s valuation of a company. The stock prices are also influenced by what a company is earning and what they think they may earn in the future. Interest rates also play a part, as do political decisions!
You’ll never understand all of this information in one go. But hopefully it is simple enough for you to digest and get an idea of where this is going. Make sure you are able to manage your money, and have escape plans for any stocks you do buy. You can find plenty more useful information on the web!