“Stocks” are synonymous with “shares” in the financial world. The term “equity share” is also used and refers to the original term “share of stocks”. In reality, a share of stocks is a share of ownership in a corporation. When you buy stocks, you are buying equity in a company and are considered part owner.
Stocks allow companies to raise money to operate or grow their business. In turn, the shareholders hold equity and have a financial stake in the success of that business. A company or corporation issues a finite amount of stock in a company. If a corporation issues 10,000,000 shares of stock and you own 100,000 of those shares, you own 1% of that corporation.
If a stock price goes up, your percentage of the company increases in value. If a stock price goes down, your percentage of the company decreases in value. So if you own 1% of a company and its stock price is $30, you’ll own the same percentage of the company tomorrow that you do today (assuming you invest no more or sell any stocks). If the price of shares go to $35, your percentage of the company is worth more. If the price of the shares go to $25, your percentage of the company is worth less. If there’s a rapid climb in stock one day, this will spur some investors to get out of that investment, so after a day or big gain, you’ll often see the next day a lot of selling that lowers the stock prices for a particular company.
As you see, the prices of stock fluctuates every day. Don’t let the changes of one day embolden or discourage you too much. Instead, look for good investments where the business model of the company and their product or service is likely to be more in demand in the future, and then have faith in the companies you invest in. Over a long period, if you’re right, your investment will pay off.
Investing In The Stock Market
The stock market has lost over 5,000 points in the past six months. The speculators investing in the stock market seem to have taken their money (what they have left) and gone home, while many serious investors have taken their money out of the stock market and placed it in safer investments, like savings accounts, IRAs and bonds. With money flowing out of the New York Stock Exchange, fear grips the markets and no one is quite certain where the bottom is going to be.
This makes it a daunting takes to invest in the NYSE or any stock exchange at the moment, so now might not be the right time for someone brand new to the stock market to get into the investing and try to draw lessons from their investments. At least, that’s the case if you’re hoping to speculate in the stock markets.
On the other hand, if you’re looking to make long-term investments and are hoping to find stocks and companies that are vastly underpriced because of the panic, now might be a perfect time to invest in the stock market. Look at stock market investing as a marathon, not a sprint, though. If you’re getting in, be prepared for temporary losses and frequent downturns in the near future. Also, investments under $1,500 are unlikely to make enough money soon to cover the price of your online transaction fee, but it might over a much longer period.
Eventually, the market prices should begin to rise once again, once people see the “bottom” and they can start to assess the true value of stock and where their investment money might best be spent.
Hopefully, the stimulus package will help to stem the losses and maybe begin a turnaround, since government spending is meant to get enough money into circulation that it spurs the economy.
Online Stock Trading & Online Investing
There are all kinds of places to invest in the stock market online. During the bubble of the last few years, it was easier and cheaper than ever to invest online. So there are famous online investment companies like e*Trade and ScottTrade. TD Waterhouse is another online stock market brokerage whose commercials you’ve seen or whom you’ve heard about.
When buying stocks on the internet, make sure your broker is registered with the SEC. Go to the SEC website and double-check the information there.