What Are Stocks

Stocks are shares of a company. When you buy a stock you are actually buying a piece of the company and to some extent profit as the company grows and lose money as the company loses money. Companies issue stock for one simple reason to help them raise cash. By selling large amounts of their stock they are receiving money up front which they can use to grow their business, or pay for upcoming expenses. As the investor you are betting that the underlying company is going to grow over time. If it does you can benefit from the rising price of the stock that you just bought. If the company shrinks then that may also be reflected in the stock’s price. Many stocks also offer dividends which allow you to benefit from the companies earning. A dividend is a payment that is made to all stock holders based on how many shares they have. If the dividend is $.10 and you own 1000 shares that is $100. This is a way for the company to spread out its profit with all of its share holders. In short stocks are a win, win situation. It allows individuals to invest their hard earned money and grow and it also allows companies to sell stock to raise money. But they have to be careful with how much stock they are selling because each stock they sell is one share of the company. If there are 1 million shares of stock whoever holds at least 500,001 shares controls the company. For more on the stock market basics or to find out why people invest in the stock market visit http://www.stocks-simplified.com/why_invest.htmlrn