How do Stock Prices Change?
When you buy stocks, you have two ways to make money. You can make money through dividends that the company pays for each share you own. For example, they might pay 25 cents per share each quarter. Dividends are not guaranteed, though.
You can also earn a profit through capital gain. When you buy stock, you will pay a certain price. If in the future the price goes up, and this is what you want it to do, you can sell it and make a profit. Subtract what you paid for what you sold it for and this is your capital gain.
When investors purchase stock, they are doing it in hopes of making capital gains. Those in retirement usually look for dividend paying stock because it is a stable source of income. Otherwise, dividends are just a bonus to the investment.
You can't make capital gains unless the price goes up. (unless your selling short, but that's an entirely different idea) Stock prices are always changing and can go up or down. What makes them change?
The price of stocks goes up and down the same way that the price of anything else goes up and down. It is an economic principle of supply and demand. Maybe you remember that from your economic class.
An increase in supply with the same demand will decrease the price. An increase in demand with the same supply increases the price. The price changes depending on whether and how supply and demand change.
With stocks, if a lot of people want to buy a particular stock and not enough people are selling, they will have to raise the price to accommodate for it. If there are more people looking to sell than people willing to buy, they will need to decrease the price to get people to buy.
If you understand how this works, you can better understand how to make money with stocks. You want to buy stocks that you think a lot of people will be buying in the future so that the price goes up. - 23199
You can also earn a profit through capital gain. When you buy stock, you will pay a certain price. If in the future the price goes up, and this is what you want it to do, you can sell it and make a profit. Subtract what you paid for what you sold it for and this is your capital gain.
When investors purchase stock, they are doing it in hopes of making capital gains. Those in retirement usually look for dividend paying stock because it is a stable source of income. Otherwise, dividends are just a bonus to the investment.
You can't make capital gains unless the price goes up. (unless your selling short, but that's an entirely different idea) Stock prices are always changing and can go up or down. What makes them change?
The price of stocks goes up and down the same way that the price of anything else goes up and down. It is an economic principle of supply and demand. Maybe you remember that from your economic class.
An increase in supply with the same demand will decrease the price. An increase in demand with the same supply increases the price. The price changes depending on whether and how supply and demand change.
With stocks, if a lot of people want to buy a particular stock and not enough people are selling, they will have to raise the price to accommodate for it. If there are more people looking to sell than people willing to buy, they will need to decrease the price to get people to buy.
If you understand how this works, you can better understand how to make money with stocks. You want to buy stocks that you think a lot of people will be buying in the future so that the price goes up. - 23199
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Do you want to know how do stocks work? Find out if you should choose the stock market or bond market to invest in.
posted by X - Men @ 12:36 AM
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