What TF are stocks?! I know you’ve heard about them and maybe you know a little about them but feel like these are things you should just know so you never want to ask more because it feels a little embarrassing to ask things that you’re just supposed to know about. If you’ve ever felt like that, it’s okay! Don’t be ashamed because the truth is how would you just know if nobody ever talks about it and if it’s not something taught to us from a young age?
Well fear not, I’m going to explain what stocks are in the simplest way possible. Ready?
Before we get started, I want to remind you that nothing on my blog should ever be taken as actionable investment advice. This post is not advice and is simply for information purposes only. You should always consult a financial professional when making investment decisions.
Okay now that we got that out…
When a company issues stock, it means that it sells a portion of itself in exchange for cash. Company ABC may want money to grow their business and they are willing to give you a piece of ownership in Company ABC if you are willing to pay for that ownership.
How do stocks work?
Some start-up companies may find themselves growing quickly and want to continue to expand on that growth and sometimes they will need more money than they have to do so. Enter stocks. A company can get additional financing by splitting up the company into shares and then selling a portion of these shares to the open market through a process known as an initial public offering or more often heard as IPO.
If a person buys one of these small shares, they get partial ownership of the company. This may be a teeny tiny amount and therefore not resulting in a huge stake in the company, but still ownership nevertheless.
If a company does well, the value of the company can increase over time and if you’re an investor with a company stock for a company whose value does increase it means that the value of your stock can increase as well. At the same time, if a company does not do well and their value decreases it can result in your stock decreasing in value and you losing money.
How do I buy stocks?
If you buy a stock of a company, you likely won’t buy it directly from the company but instead from another investor who wants to sell the stock. Similarly, if you want to sell a stock you own, you can also sell it to another investor. These trades are handled through a stock exchange with a broker that represents each investor.
Are stocks right for me?
Stocks can be very risky investments and whether they are right for you will depend on many factors such as your risk tolerance. While you may invest in stocks and make a return, anytime you are investing in the stock market, you are taking on risk and can lose your hard-earned money. To find out if and what stocks are right for you, consult your financial professional.
Nothing on this blog should be considered personal actionable advice, research, or an invitation to buy or sell any securities. Consider all risks before investing, including the loss of your hard-earned money. Vee is an Investment Advisor for Warren Street Wealth Advisors, this blog reflects her personal views and not that of Warren Street.
