What Are Stocks
You may have heard of the stock market but are not really sure what it is. Well if that is you then here is a brief summary of what it is and how it works to make you money.
Stocks represent a share of a company.When you invest into a stock you are investing into the company and becoming a partial owner of that company. For instance, if you own stock in the company Microsoft you would actually own a small portion of that company making you a partial owner in the largest company in the world.
Because you are partial owner you may actually receive some benefits.For example, stocks that pay dividends will pay you a small amount of money for every stock that you own on a consistent basis. This is supposed to represent your share of the earnings from that company.
Stocks can really be a great way to get some extra income.But it isn’t the only reason to invest into stocks. It is not even the main reason to invest into stocks.
The biggest reason to invest into stocks is the capital growth opportunity that they come with.Stocks go up because of supply and demand.If there are more people that want to buy a stock then sell it then the price of the stock will go up in order to find more sellers.
On the other hand, if more people want to sell a stock then buy it then the price of the stock will go down to reflect that. Over the long term however fundamentally strong stocks will go up more often then they go down.This is basically because stocks that are fundamentally strong have things like great earning reports which in turn bring in a lot of buyers for their stock and push the price of the stock up.
So by investing into fundamentally strong stocks you can end up in an investment that is likely to appreciate over the long term. Thus your wealth would increase as a result.
