What Is the Stock Market?
The stock market is an everyday term we use to talk about a place where stocks and bonds are “traded”, meaning they’re bought and sold. For many people, that is the first thing that comes to mind for investing. The goal is to buy the stock, hold it for a time, and then sell the stock for more than you paid for it.
How Does it Work?
When you buy stock, you become a shareholder, which means you now own a “part” of the company. If the company’s profits go up, you “share” in those profits. If the company’s profits fall, so does the price of your stock. If you sold your stock on a day when the price of that stock falls below the price you paid for it, you would lose money. In the stock market, prices rise and fall every day. When you invest in the stock market, you are hoping that over the years, the stock will become much more valuable than the price you paid for it.
There are many ways to invest your money. Before you invest, think about these factors:
- Safety – how risky is it?
- Liquidity – can you easily get your money out of the investment?
- Return on the investment – what’s your earning potential?