What are stock?
Stocks are traded companies that has a number of shares. Each share is an ownership stake in the company. A company can have as few as 10 (or fewer) shares and as many as billions of shares. How large ownership stake a single share gives you in the company depends entirely on how many shares there are in total. A company can have different classes of stock. Different classes can entitle you to different voting rights or different dividends. All shares within the same class give the same rights. The more stock you own the larger voting power you got and the higher total dividend you will receive. You usually need to own a very large number of shares to be able to have any real influence in a company but all share holders have the right to attend the yearly share holders meeting and to vote on the topics discussed their.
Some companies provide their share holders with special benefits and discounts.
Stock has played a very important historical role (and still do) as the stock company allow a number of investors to pool their resources to be able to completed projects that no one of them would be able to complete on their own due to the risk or the resources needed. The panama canal is a famous example of a project that never could have been finished without the use of stocks and shared risk. The developing of the rail roads is another example of projects that can accomplished by sharing the risk.
How does it work?
Stocks can be privately owned or publicly traded. In this article we will focus on publicly traded stock as this is the type of stock that most people invest in. Stock that you can purchase on a stock market such as the New York Stock Exchange, The NASDAQ or Euronext.
Buying and selling shares in publicly traded stocks are very easy. Modern internet based brokers offer easy to use platforms that are no harder to use then Amazon or eBay. The first thing you need if you want to trade stocks is an account with a stock broker. I recommend choosing an internet broker since they are easier and cheaper to use than the service offered by banks. Robinhood.com is a good example of a brokerage service that allow you to trade for free.
It is very important to chose a good broker with low prices. This is especially true if you want to invest small amounts of money. Large fees can make it very hard to make money if you make small transactions.
Once you have chosen a broker and deposit money to your new account you are ready to buy and sell stock. All you have to do now is to decide which stock you want to buy. Once you decided you have to find the stock in the stock lists and enter the stocks trading page. Once there you can decide how many shares you want to buy and at what price. You can either choose to buy the stock at best price which guarantees that you get the stock or at a fixed price. If you choose a fixed price then you are not guaranteed to get the stock you want but the broker will try to fulfil the order if possible.
Selling works in a similar way to buying stocks.
Can you earn money?
Yes. Any one can make money trading stocks as long as they do not get greedy. Long term position in blue chip and dividend stocks is an easy way to get a good return on your money.
Who should trade ?
Stocks should be included in ever investors portfolio. If you have a small portfolio you can chose to invest in nothing but stock. Your goal should however be to diversify your investments as soon as possible to minimize risk.
Is it a scam?
No the stock market has been the best place to invest your money during the last 100 years.
Do you recommend?
Yes, I highly recommend that you invest in stock. It is one of the easiest and best investments available to retail investors. If you do not want to invest in stock directly then you can choose to invest in an index fund. It is an easy way to get the benefit of investing in the stock market without having to choose which stock to invest in.