Beginner's Guide to Stocks
Stocks do not travel in a
Hi, my name is Jon and I'm an independent investor in Kansas City and I'm going to share with you a beginners guide to stocks on About.com. Owning a stock is the same as owning a piece or a share of a company. Companies that are looking to get off the ground or expand are looking to raise capital. They could get a loan from the bank, but would then have considerable amounts of debt and have to pay interest. Or they can offer shares of stock to the public for a price and raise their capital that way. As an owning of stock you are entitled to a share of that companies profit or loss. Companies that already have existing stock are traded on the stock market by individuals, institutions or others. Stocks are bought and sold every day on the stock market which is nothing more than a big auction. Individual investors are trying to predict whether or not other investors will pay more for his shares in future hopes that the company will continue to grow earning and increase their profit. That way, the investor who bought the shares at a lower price will make profit once he decides to sell. The investor who is buying those shares also believes that the company will continue to do well and he then plans on selling his shares to another investor and also make a profit.However, stock do not travel in a straight line. Companies go through periods of growth and also difficult times which causes stock prices to go down. Meaning investors are more eager to sell but other investors are only willing to buy at a much lower price. Over time the stock market has generally risen 8-10% annually over the past 100 years, meaning that some years your stocks will be down and some years they will be up. But over time they will generally rise as the company grows. So if an investor manages his risk he can make money buying stocks and holding them for a period of time.The first rule of thumb is always managing your risk, because just as stock prices can go up they can also go down.Thanks for watching and for more information on stocks and investing check us out on the web, at money.about.com.