What are stocks?
Stocks are shares of the ownership of a company. The more company stock you purchase, the more ownership you have in the company. Along with ownership rights, once you become a stock holder, you also have voting rights. Only public companies issue stocks that are available for the general public to purchase.
How do you buy and sell stocks?
To purchase stocks, you will need a stock broker or an account at an online brokerage firm. There are distinct advantages of using a stock broker, who typically has an in-depth understanding of the market and how stocks are performing.
How do you make money from buying stocks?
The most common way is to purchase them at a lower cost, hold them for a period of time, and then sell them at a higher price. There are many times that stocks go down in price, leaving you with a stock that is worth less than what you paid for it. That’s why investing experts typically recommend holding on to stocks for a longer period of time, since market fluctuations can cause large drops in stock value that later recover. The other way to make money on stocks is to hold onto any shares purchased and collect dividends, which are paid by companies to their shareholders. Dividends are usually paid quarterly, but not all companies pay dividends.
What are the different types of stock you can purchase?
There are two types of stocks; Common Stock and Preferred Stock. Common stock represents an ownership stake in the company that is issuing the stock as well as voting rights, while Preferred Stock gives stock holders certain advantages not available to common stock holders such as a predetermined dividend amount as well as the option to be paid before common stock holders should a company face liquidation.
What are the disadvantages of investing in stock?
Like any investment, stocks can be profitable, or provide nothing in return for your investment. Volatility is the number one disadvantage of investing in stocks, but if you’re able to hold on patiently through any volatile periods, you’ll likely fare well.
If you’re patient, willing to do some initial research, and are comfortable with uncertainty, investing in the stock market may be a good option for you.
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