Stocks, otherwise known as equities or shares are a certificate representing partial ownership of a company. By owning a share of the company, you stand to financially benefit when the company does well or suffer financially when it does badly.
Why do stocks go up?
Whether the stock price moves up or down depends on the value investors place on the company.
If investors expect the company to become more valuable in the future, the stock price should rise.
Likewise if investors are uncertain about a company’s future, the price of the stock could fall.
Stocks trade on a stock exchange.
The exchange acts as a central venue where market participants come together and where all the stock trading takes place.
The electronic trading system of the exchange collects all the buy and sell orders from investors.
The market price of a stock is the price at which the most buyers and sellers of the stock can transact at the current time.
How to make money with stocks
There are two ways to earn money from investing in stocks.
One is where the price rises after you buy the stock, you sell it and pocket the difference.
The second is from earning a dividend.
A dividend is a fixed amount per share paid out by the company to its shareholders on a regular basis, giving them a passive income from their ownership.
The company does this to share its profits with its owners and to incentivise investors to own the shares.
Learning about stocks
The release of a company’s earnings report, new product announcements, changes to senior management and general industry news , to name just a few, affect the stock price.
To be successful, a trader should be well-informed about the stock they are investing in.
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