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When you own stock, you own a piece of the company. This means you own a share of the company’s profits and assets. It also means you have a special relationship with the company that other people don’t have. You even have a say in how it’s run because you can vote, attend shareholder meetings, and more.
Cheat Sheet
Here are a few investment approaches:
People use a variety of investment strategies and philosophies when buying stocks. An investment strategy is a set of guiding principles that help you decide what to buy and when.
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A brokerage firm is a company that is licensed to buy and sell stocks. Brokerages provide you with a connection to the stock market and charge a commission when you make a stock trade. Some brokerages charge you just to have a brokerage account. A broker is a stock salesperson.
Cheat Sheet:
You’ve heard the saying, “Buy low, sell high,” right? People on Wall Street would love to be able to say, “I’ll buy this stock today because it’s going up tomorrow.” Unfortunately, that crystal ball doesn’t exist. No one can time the market, so don’t bother trying!
Cheat Sheet:
When a company is young, its owners are usually a small group of people that have a connection to the company (founders, employees, and investors). The company’s stock is “privately held.” Most companies stay that way, but some grow to the point where they sell shares in the company to the general public. This is called an IPO, or initial public offering.
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When you buy stock on the stock market, you aren’t buying it from the company – you’re buying it from an existing shareholder. Likewise, when you sell your shares, you’re not selling them back to the company – you’re selling them to some other investor.
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Very simply, stock prices go up and down due to supply and demand. But what exactly causes changes in supply and demand? Here are a few of the things that may lead to a stock going up or down:
