If you’ve been wondering about the stock market, or simply want to know more about it, this guide will help you get started on your own investments or help you make better financial decisions in the future. Learn how stock markets work and why they’re an important part of our economy and culture. What are stocks? How do they differ from bonds? Find out the answers to these questions and more here!
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How do stocks affect our economy?
Stocks represent a share of ownership in a company. If you own stocks, it means you’re part owner of a company. You might own 1% or 10% or even more; it depends on how many shares you purchased and for how much money. The price of your shares may increase or decrease depending on how well a company does, which affects its ability to make money. If stocks are performing well, that means that companies are thriving and making lots of profit. Profits allow companies to expand into new locations and hire more employees who will spend their income within our economy to buy food, cars, clothes, etc., causing an economic stimulus that benefits everyone… in theory at least!
Also Read Why the stock market is important to you
The basics of how a company makes money
First, a company takes money in through its customers. This happens when you buy something from them: whether it’s groceries at a grocery store or office supplies at Staples. This flow of money into a company is called sales revenue (or just revenue). Then, after taking out some expenses, like staff salaries and store rent and other costs of doing business, they turn what’s left over into profit. Profit is all that extra money they have left over after all their expenses are paid for. For example, if a company makes $100 million in sales and then spends $80 million on costs (rent and staff salaries) it will have $20 million in profit.
Why should you invest in stocks?
Anyone can invest in stocks—you don’t need to be rich, and you don’t have to know how or why your investment grows. So why should you invest in stocks? For starters, because owning a piece of a company—and participating in its growth over time—is simply better than keeping your money under your mattress. Think about it: If all you do with your savings is squirrel it away in a secure place, they don’t work for you; they just sit there. But if you put that money into an investment portfolio (stock market) and let it compound, before long you could see some pretty amazing returns—in other words, growth.
Also Read A Beginner’s Guide to the Stock Market
Without a plan, you’re just gambling . Your investment portfolio should contain investments that will grow over time. But how do you know which stocks are going to perform well in 6 months or 5 years? One of your goals as an investor should be to achieve long-term growth with low risk. For that, it’s important to consider your investing strategy and stick with it. Here are some useful tips on selecting investment strategies
Start young, start small, but don’t procrastinate.
If you’re young and have a well-paying job, it can be hard to believe that starting a side hustle or investing in stocks will make a significant difference in your finances. But when you’re young, you have more time to compound your money and more room for mistakes—in other words, if you don’t start now, it could take longer to reach financial independence. Start small with something like Robinhood or learn about mutual funds with index funds and then move up from there. Of course, don’t dive into something without first learning about it—but don’t overthink it either! You might not
Hi, I’m Pritam Saha. I have a passion for stocks and have spent my last 6+ years learning about the stock market. My Blog focuses on idea & concepts that improve the skills of the investor to manage their own money.