After doing some research on investments on, I'll simpify for everyone that stocks is a small piece of a company that you own. Stock prices changes everyday, because if more people want to buy that company's stocks than sell it, then the prices go up(vice versa). The reason why companies issue stock instead of keeping their profit to themselves is because at some point they will need to raise money, which is especially true for smaller the companies. There are two basic types of funding available that a company can use - debt or equity finacing. Debt finacing is when a company borrows or loans from a bank or by issuing bonds and equity finacing is when a company sells its stock to investors, which is also called issuing stocks. Equity financing is benefical to companies because it doesn't require them to pay back their money with interest. The risk of buying stocks is that a stock can go bankrupt, which means that your investment will mean nothing.
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Thank you for explaining what stock means. How would a stock go bankrupt?
ReplyDeleteEach year a company's earnings after all the costs are deducted (from making the products they sell), then they divide the amount left for the stockholders and divide by the number of shares held by all stockholders. If the company less money that year or the company closes down it could go bankrupt.
DeleteThis is a fantastic job in teaching something new about investing in my opinion. Many blogs talk about the rates or opportunity of investing which is helpful, but this blog taught something new and different about investing. Great work.
ReplyDeleteThanks!
DeleteGreat job! I knew very little about stocks and this blog gave me all the knowledge I need!!! Thank you! I did my blog on shares.
ReplyDeleteYour Welcome!
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