Are you looking to make money in the stock market but don’t know where to start? Don’t worry, you’re not alone!
Investing in stocks can be intimidating for beginners, but with a little bit of knowledge and understanding it doesn’t have to be. In this article, I will cover the basics of stock investing for beginners – from what stocks are and how they are created, to how you can make money from them.
What is Stock?
As a beginner, your first question might be “what is stock?”
Knowing what stock is will definitely help you make money in the market.
Simply put, stocks are certificates that represent ownership in a company. When you own a company’s stock, it means you’re a shareholder.
However, nowadays when you buy a stock, you won’t actually receive physical shares. Most stocks are held in electronic form. This is known as “book-entry” ownership, where the ownership of the shares is recorded electronically in a central depository, such as the Depository Trust Company or DTC, which manages electronic securities transactions in the United States.
When you buy a stock, your broker will provide you with a confirmation statement showing the details of the transaction, including the number of shares purchased, the price paid per share, and the total cost of the purchase. This confirmation serves as evidence of your ownership of the shares, regardless of whether or not you receive a physical certificate.
How do stocks come Into Being?
The creation of stocks can be seen as part of a company’s growth process. When a company grows bigger, it needs more capital to develop. Apart from borrowing money from the bank, if they are big enough, they can apply for listing on an exchange where their shares will be sold to the public.
For instance, let’s say there is a cafe. The owner sees that his business is growing and wants to raise some funds to open more branches. As long as they meet the minimum requirements, they could submit an application to stock exchange and sell shares of their cafe to the public through the stock market – these shares are stocks and those who buy them become shareholders.
How do you Make Money From Stocks?
When a company does well, shareholders also benefit. Firstly, when the company makes money, they usually pay dividends to their shareholders – some companies do this quarterly while others do it annually or even semi-annually. Shareholders will get money regularly in this way.
In addition, as the business expands, the company naturally becomes more valuable and our stocks also appreciate. In other words, if you buy good stocks and collect dividends at the same time as your stock prices go up, your wealth will increase too!
So if you want to make money from investing in stocks, it’s important to find a company with potential so that the business continues to grow and you can continue to make more money.
Shareholders’ Rights
Once you’ve bought stocks, you become a shareholder in the company and that means you can enjoy certain rights. These include:
1.Ownership
When you buy a company’s stock, you become a part-owner of that company. You get to own a small piece of the company.
2. Dividends
Sometimes, when a company makes a lot of profit, it shares some of the money with its shareholders in the form of dividends. This means you can get extra money just for owning the stock.
3. Growth
As the company grows and makes more profit, the value of your stock may go up. This means you can sell the stock for more money than you bought it for and make a profit.
4. Power to Vote
As a shareholder, you may have the right to vote on important company decisions, like who should be on the board of directors or what the company’s goals should be.
5. Access to information
Shareholders have access to information about the company, like financial reports and updates, so they can make informed decisions about their investment.
6. Fun
Investing in stocks can be a fun and exciting way to learn about businesses and the economy. It’s like playing a game where you get to make decisions and see how they turn out!
These are some of the basics you need to know about stocks as a beginner. With this knowledge, you’re well on your way to making money in the stock market!