If you are interested in investing in stocks, it is essential to first fully understand just what stocks are.
Definition
Stocks are shares. This share is a piece of a company that you can purchase and own. When you invest, you buy a part of the company and give them money to build and grow.
A stock is just one type of investment that people purchase throughout their life. Another type of investment is buying a house.
What kind of stocks can I buy?
There are typically two types of stocks: private and public.
Stock Market
The stock price changes every day on the stock market. How you buy it now is online and in a company that people purchase for a set price that fluctuates daily based on the stock market. The stock you purchase typically electronically signifies that you own a small percentage of the company and are invested in how well the company does.
When you buy stock, you become a shareholder, which means you own a little piece of the company. So, if profits go up, you reap some of the rewards of those profits. If the company’s profits drop, so does the price of your stock.
If you sell your stock on a day when the price of that stock falls below the price you paid for it, you lose money. Most stocks are considered volatile investments, which means they can have major price swings in a short time period.
Why would I want to buy stocks then?
If you support a company, are invested in whether or not it does well, and believe (through your research and opinion) that it will succeed in the future, you might consider buying a small share.
Purchasing and selling stocks is one way that people make money.