Stocks are generally liquid investments. Prices of stocks fluctuate up and down and the returns of stocks are not fixed
- Have you ever heard the phrase "With stocks, you own. With bonds, you loan"?
- Shares and Equities are synonyms for stocks.
- When a company needs money, it can either take a loan from a bank, issue a bond to the public, or sell part of the company to investors, which in other words means issuing stocks.
- A share of stock is the smallest unit of ownership in a company. If you own a share of a company’s stock, you are a part owner of the company and you have a claim on its assets and earnings.
Generally stocks are common or preferred, or even the company may create its own type of stocks. Common stock represents the majority of stock held by the public. It has voting rights, along with the right to share in dividends. Preferred stock has fewer rights than common stock, except in the dividends area. Companies that issue preferred stocks usually pay consistent dividends and preferred stock has first call on dividends over common stock.
Many factors affect the price of a stock. In simple terms, a stock's price rises when there are more people wanting to buy a stock than there are people who want to sell it. People compete to buy the stock if they believe that the price of the stock will rise and they will make a profit. A stocks price falls if there are more people who want to sell a company’s stock than there are buyers. Sellers compete to offer the highest price to a buyer while the buyer wants the lowest price. You don’t know if a stock price will go up or down! Your stock investments can lose money as easily as they can make money. This is one reason some people use an adviser to help them decide which stocks to buy, and when to sell. Read more of what makes investing in Stocks risky business.
Find out about the 7 Questions to Ask Before You Buy a Stock.
Read about the Advantages and Disadvantages of Buying Stocks Instead of Bonds. You might want to check out how stocks relate to the US Economy, as well as their benefits, and how to participate in the stock investment market.
Personal Financial Tips
- Pay your bills on time.
- Eat more at home and less out.
- Take your food to work.
- Forgo the ice cream store and pop popcorn at home.