A lot of people hear about the stock market on the news and snatches of conversations while they're growing up but, thanks to our woefully deficient educational system, don't know even the basic information, let alone about investing for incomes.
Owning Stock is Being an Owner in that Company
Owning stock is owning a small piece of the company. Companies usually start out small. Sooner or later, they need more money to use to expand.
So they sell ownership in the company. That is, shares of stocks, to everybody who wants to buy it.
From then on, investors can buy and sell these shares of stocks. There are large marketplaces called stock exchanges. The New York Stock Exchange is the biggest in the United States.
You must pay a broker to buy the stocks for you, because ordinary people don't have access to the stock exchanges. So you pay the broker a commission to buy the stock for you.
Usually people buy and sell stocks in groups of one hundred. It can be one hundred, four hundred, one thousand and so on. It's possible to buy and sell 58 or 132 at a time, but not common. One hundred shares is known as one round lot.
Then the broker holds the shares in an account for you.
You Can Buy and Sell Stock Shares Every Business Day on Stock Exchanges
If you later decide to sell those shares, you pay the broker a commission to do so.
The price of the shares of stock go up and down constantly. The stock exchanges are big marketplaces where people are always buying and selling.
The market prices of shares of stock follows the economic law of supply and demand.
Stock Share Prices Go Up and Down -- Constantly
When demand is higher than supply, the price goes up.
When demand is lower than supply, the price goes down.
Think of it like buying bottles of water. If one brand of water wanted $50 per bottle while the other brands were only $2 per bottle, would you pay the $50? Of course not. Because there's a large supply of cheaper water.
But if you were in a desert and there was only one bottle of water available, you'd gladly pay the $50. That's high demand, low supply.
Stock prices constantly fluctuate with the buying and selling.
Now, here's the tricky part . . .
You Can't Predict What a Stock's Price Will Be in the Future
If you buy shares today to sell them later, you may or may not make a profit.
You don't know if the price next week, next month or next year when you sell them will be higher, or lower.
Don't Believe Gurus and Experts Who Claim They Know the Future
Lots of people claim to know what stocks will go up, but their long-term records show their results are random. Sometimes they are right, sometimes wrong. Just like flipping coins.
Plus, most capital gains depend on the overall market. Nobody can control or predict it.
You Can Buy Stocks to Receive Income From Them
A better reason to buy stock is to receive an income of dividends for the rest of your life.
Dividends are payments made by a company out of its profit, usually paid quarterly, to shareholders.
Not all companies pay dividends. In general, older, more established companies pay them, and newer ones don't.
After all, stock owners are owners of the company. They should be rewarded by buying and holding the company's stock.
There are no guarantees, but some companies have paid dividends every year for decades. Over time dividends usually go up, because companies grow and make more profits. Some companies have raised their dividends every year for decades.
Therefore, because capital gains can't be predicted or controlled, investing for incomes is the smartest way to go.
Author Resource:
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