STOCKS...?
STOCKS...?
For most people, hearing the word 'stock' sounds risky and confusing. This makes total sense since most people are not properly educated on what a stock is, and how the stock market works. The good thing is that its never too late to start investing in stocks. Below I will explain the fundamentals of what a stock is, how the market works, and most importantly, how you could make money.
WHAT IS A STOCK?
Most companies that exists can either be considered as a private or public company. A private company is a company that is owned by one individual owner, or a small group of owners. All the decisions made by this company are based on those owners, as they have the main say in what goes on in the company.
On the other hand, there are public companies. These are companies that are owned by thousands, or millions of people. These are people who have bought stock from the company, also known as shareholders. All public companies first started off as private businesses. Eventually, if the owners want to sell off their part of the company, or the company needs to raise the money, they will go public and sell off their company. When a company goes public they are basically splitting the company up into individual stocks. If you buy one of these stocks, also know as a share of a company (hence shareholders) you own part of that company.
HOW MUCH DO THEY COST?
Different companies will have a different cost per stock price. The price does not really indicate how big or strong a company is. In order to see the true size of the company, you must multiply the cost of one stock by the total amount shares that the company has.
For example, the cost of Coca Cola is currently $55.35 per share. The company has 4,281,842,818 shares in total.
$55.35 x 4,281,842,818 = $237,000,000,000.
From this simple calculation, we can see that the company Coca Cola is worth about $237,000,000,000.
This shows that the value of the company is not dependent on the share price, so don't just buy a stock because they have a high price. The value of the company is known as its Market Cap.
WHERE DO I INVEST?
A few decades ago most of stock investing was done in banks or over the phone, but now it had moved to the internet. One common way of investing is through a bank's website. Almost every Canadian bank and American bank will allow you to browse and purchase investments online. Before investing many people also talk to a financial advisor at their bank to ensure they are making good decisions.
Another way to invest in the stock market is through online brokers. These online brokers like Questrade or Robinhood allow you to purchase stocks online in a very similar way as the banks.
It is important to realize that no matter what either of these companies is going to charge you money whenever you make a trade. Average fees cost around $5-$10 each trade you make. It is important that before you invest that shop around and find the right broker for you, whether with your bank or online broker.
MOST IMPORTANTLY, HOW DO I MAKE MONEY!
Buying good investments that will make you money is the ultimate goal when investing in the stock market. It is important that you invest in companies that you think are strong and that could grow in order for you to gain money and not lose it. There are two main ways to make money in the stock market; capital gains and dividends.
The first way to make money is in capital gains. What this means is that you buy a stock for one price, and then it rises to a higher price. The opposite would be if the stock price went down in value and your investment is worth less.
The stock market is like most other financial markets, its revolved around supply and demand. When a company is doing well, such as having increased revenues and growth there is a high chance that many people will want to buy the stock. There is also a high chance that most people who own the stock will not want to seel because their investment is doing well. This, in turn, will cause the price of that stock to rise. If you own that stock you are making money since your investment is becoming more valuable.
The simple way to put is... Buy low, and sell high.
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Most people are often excited about the high chance of growth of a stock after seeing people make billions of dollars in companies like Amazon and Apple. The reality is that it is very hard to pick these stocks that will explode, and oftentimes people lose a lot of money.
For this reason, the second way to make money is much more stable and secure. Some companies have something that is called a dividend. A dividend is basically a cash payment to every single shareholder. Basically, since you own a small share of the company, you will get a small share of profit. The amount that you make is based on the dividend payout percentage that the company sets on its own. Some dividends will pay you a yield of 1% of your investment each year, and others will pay over 10%.
This yield makes some stocks much more attractive because you know whether the stock price goes up or down you will make a bit of money.
Below I will show you an example of how dividend payment works.
A person owns $1000 worth of Coca Cola stock. The yearly dividend yield of Coca Cola stock is 2.9%.
$1000 x 2.9% = $29
At the end of the year, that person will receive $29 for owning the shares. Keep in mind that if the value of these stocks goes down the payment will also go down. Also, most companies pay semi-annually or quarterly meaning this payment may get split up.
If you read this all the way through, Thank you! This is my first blog post. I hope to continue making posts that will help people learn about finances and investments. If you have any question please feel free to email me at - icsoares02@gmail.com
For most people, hearing the word 'stock' sounds risky and confusing. This makes total sense since most people are not properly educated on what a stock is, and how the stock market works. The good thing is that its never too late to start investing in stocks. Below I will explain the fundamentals of what a stock is, how the market works, and most importantly, how you could make money.
WHAT IS A STOCK?
Most companies that exists can either be considered as a private or public company. A private company is a company that is owned by one individual owner, or a small group of owners. All the decisions made by this company are based on those owners, as they have the main say in what goes on in the company.
On the other hand, there are public companies. These are companies that are owned by thousands, or millions of people. These are people who have bought stock from the company, also known as shareholders. All public companies first started off as private businesses. Eventually, if the owners want to sell off their part of the company, or the company needs to raise the money, they will go public and sell off their company. When a company goes public they are basically splitting the company up into individual stocks. If you buy one of these stocks, also know as a share of a company (hence shareholders) you own part of that company.
HOW MUCH DO THEY COST?
Different companies will have a different cost per stock price. The price does not really indicate how big or strong a company is. In order to see the true size of the company, you must multiply the cost of one stock by the total amount shares that the company has.
For example, the cost of Coca Cola is currently $55.35 per share. The company has 4,281,842,818 shares in total.
$55.35 x 4,281,842,818 = $237,000,000,000.
From this simple calculation, we can see that the company Coca Cola is worth about $237,000,000,000.
This shows that the value of the company is not dependent on the share price, so don't just buy a stock because they have a high price. The value of the company is known as its Market Cap.
WHERE DO I INVEST?
A few decades ago most of stock investing was done in banks or over the phone, but now it had moved to the internet. One common way of investing is through a bank's website. Almost every Canadian bank and American bank will allow you to browse and purchase investments online. Before investing many people also talk to a financial advisor at their bank to ensure they are making good decisions.
Another way to invest in the stock market is through online brokers. These online brokers like Questrade or Robinhood allow you to purchase stocks online in a very similar way as the banks.
It is important to realize that no matter what either of these companies is going to charge you money whenever you make a trade. Average fees cost around $5-$10 each trade you make. It is important that before you invest that shop around and find the right broker for you, whether with your bank or online broker.
MOST IMPORTANTLY, HOW DO I MAKE MONEY!
Buying good investments that will make you money is the ultimate goal when investing in the stock market. It is important that you invest in companies that you think are strong and that could grow in order for you to gain money and not lose it. There are two main ways to make money in the stock market; capital gains and dividends.
The first way to make money is in capital gains. What this means is that you buy a stock for one price, and then it rises to a higher price. The opposite would be if the stock price went down in value and your investment is worth less.
The stock market is like most other financial markets, its revolved around supply and demand. When a company is doing well, such as having increased revenues and growth there is a high chance that many people will want to buy the stock. There is also a high chance that most people who own the stock will not want to seel because their investment is doing well. This, in turn, will cause the price of that stock to rise. If you own that stock you are making money since your investment is becoming more valuable.
The simple way to put is... Buy low, and sell high.
Most people are often excited about the high chance of growth of a stock after seeing people make billions of dollars in companies like Amazon and Apple. The reality is that it is very hard to pick these stocks that will explode, and oftentimes people lose a lot of money.
For this reason, the second way to make money is much more stable and secure. Some companies have something that is called a dividend. A dividend is basically a cash payment to every single shareholder. Basically, since you own a small share of the company, you will get a small share of profit. The amount that you make is based on the dividend payout percentage that the company sets on its own. Some dividends will pay you a yield of 1% of your investment each year, and others will pay over 10%.
This yield makes some stocks much more attractive because you know whether the stock price goes up or down you will make a bit of money.
Below I will show you an example of how dividend payment works.
A person owns $1000 worth of Coca Cola stock. The yearly dividend yield of Coca Cola stock is 2.9%.
$1000 x 2.9% = $29
At the end of the year, that person will receive $29 for owning the shares. Keep in mind that if the value of these stocks goes down the payment will also go down. Also, most companies pay semi-annually or quarterly meaning this payment may get split up.
If you read this all the way through, Thank you! This is my first blog post. I hope to continue making posts that will help people learn about finances and investments. If you have any question please feel free to email me at - icsoares02@gmail.com
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