The stock market is considered to be a good way to grow your money over the long term. But what exactly are stocks? What is a stock and what happens when you invest money into it?
Ownership of a Company is split up into many different shares of something called stock. When you buy a stock you invest into that company and become a part owner of it. For example if you invest into Coke’s stock (KO) you buy a percentage of Coke and benefit as it grows.
There are two ways to make money by holding onto a stock over the long term. The first is grow. As the company grows their stock appreciates. So, by investing into stocks in strong companies and holding onto them for the long term you have a good chance of making money.
There is a second benefit, some companies offer dividend paying stocks. If a company pays dividends they pay a percentage of their earnings to their stock holders. Simply by holding onto stocks you obtain a monthly cash flow off of your investments.
There is one big disadvantage of stocks however. If you buy a stock and the stock’s value goes down you lose money. There is no telling with 100% certainty that a stock is going to go up. By holding strong stocks over the long term it is very likely that you will see a profit, but it is not a “done deal.” There is always risk involved and you have to be comfortable with those risks before investing.
All and all the stock market can be powerful place to grow your money. The more effort you put into investing and the more often you ask smart stock investing questions like what makes a stock go up and down, and what are some stock market basics which can help you to find those investments, the more opportunities you’ll be able to see and hopefully that will translate into more profits.
