How do stocks work? That seems like a question that one should know before investing. However, with the billions of dollars invested in employer retirement plans, many people don't have the answer to that question.
What Are Stocks?
A stock represents a means for companies to raise capital outside of a regular revenue stream. When companies sell shares of stock, they sell a small piece of ownership for interested investors to buy. In doing so, investors get voting rights, dividends, and any gains from increases on the stock market.
Stocks and IPOs
Companies start as privately held and are not listed on any stock exchange. Its leaders must decide to start selling shares to the general public through an initial public offering (IPO).
How Do You Make Money From Stocks?
There are a few basic ways to make money from investing in stocks. You can make the stock market work for you, buy and sell for quick capital gains, or grab stocks that pay dividends.
How To Invest in Stocks
There are two avenues investors can pursue when looking at stocks: direct ownership and indirect ownership.
When analyzing stock investment options, investors study some figures to determine whether to buy or sell shares. Shares of stock listed for a set dollar amount can be spot on or over or undervalued.
Are Stocks a Good Investment?
Stocks offer incredible investing potential and can lead to massive profits if done correctly. While admittedly rare, individuals have achieved their financial goals from investing in the stock market.