Richard Na: What are stocks? How do they work and how important are they in the stock market?
I’m 16 and I’m just curious about stocks. I’ve been hearing them a lot these days, and I know that they play important roles in the economy. However, I’ve never gotten to know a solid, concise description of stocks, and how they work. Why invest in stocks? How do stocks fall? Are the amount of stocks owned by businesses proportional to their size?
Thank you. 🙂
Answers and Views:
Answer by Spook
An instrument that signifies an ownership position (called equity) in a corporation, and represents a claim on its proportional share in the corporation’s assets and profits. Ownership in the company is determined by the number of shares a person owns divided by the total number of shares outstanding. For example, if a company has 1000 shares of stock outstanding and a person owns 50 of them, then he/she owns 5% of the company. Most stock also provides voting rights, which give shareholders a proportional vote in certain corporate decisions. Only a certain type of company called a corporation has stock; other types of companies such as sole proprietorships and limited partnerships do not issue stock. also called equity or equity securities or corporate stock. investing in stocks is like investing in the business. stocks fall when everyone decides to sell the stock and the price falls due to low demand. stocks are proportional, they sometimes split if they get high enough, essentially doubling ur stock if u have ownership at the time. if u had 10,000 dollars of microsoft stock in 1988, you would be a millionaire right now.; hope this helps
Stocks are Very Important in the economy. Without them, we’d be back in the age of the wild wild west using oil lamps, riding horses, and taking the Schenectady Express to work as a paperboy.
Stocks are basically a way to notate the fact that you own a portion of the company. When you own more than 1/3 of the shares of stocks to a company, the company is yours! That’s why when you buy stocks, you are actually buying a piece of the company and how the company does will determine whether you profit off your stocks or go bankrupt on your shares. Companies thrive off of stocks.
When you pay to buy stocks, you either profit as the company does well or go towards bankruptcy as the company fails. That’s why you have to do your research before you ever hit that buy button. The stock market is in one way can be seen as gambling. When a couple of people get scared to lose their money and sell off, the company’s value drops. When the company’s value drops, other investors get scared and also sell off. As a result the company does even worse. That’s why one person’s selling triggers a chain reaction avalanche that can only stop when people start buying again. When people are buying like crazy, it triggers a positive chain reaction where people buying triggers more people to buy.
You want to buy low and sell high.
Answer by Max MIf you’re a rookie in investing or stocks, go to
www.finance.yahoo.com.
Open up a portfolio without using real money. You can give yourself as much or as little money to try out the market. The stocks you want to focus on is consumer staples, consumer discretionary, and healthcare. These are DEFENSIVE stocks that will survive through good and bad times. Most of my positions are in these stocks. Some names include 3M, Procter & Gamble, Kimberly Clark, Exxon Mobil, Walmart, Costco. Everybody’s got to eat and wipe their butts regardless of the state of economy. Many of these companies survived through the Great Depression.
That’s the benefits. You can sleep at night knowing your money is doing well. There are NO guarantees that you won’t lose money. It’s just that these stocks are the best. They pay good dividends too.
Then once you’re comfortable and test the waters of the market, you can finally put some real money in. Go to Scottrade.com. They’re excellent for beginners.
If you’re new to stocks, DON’T DAY TRADE. You’ll a rookie in a world of professionals. I tried day-trading with Citigroup and AIG when they were a little bit over $ 1. I had some luck at first, making about $ 30 a day but I was way over my head. My luck didn’t last long and I had to rethink my strategy.
Day trading involves A LOT of commissions to the broker. With all the commissions deducted from each trade, you’ll be lucky if you only lose half your money.
I would just day trade using Yahoo! Finance. Open a stimulation account, give yourself $ 100 worth of fake money and play it in the stimulation format. You’ll see what I mean by losing money every easily.
Good luck.
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