If you don’t buy stocks outright, you probably own some, anyway. Buying shares, or bits and pieces of businesses, are moneymaking moves for managers of 401K plans, insurance and retirement accounts.
Stocks, or small portions of public companies, are the most common investment vehicles. Americans have always liked the idea of part-ownership in profitable corporations, such as auto manufacturers, pharmaceutical firms, food producers, or health care services.
Companies sell stock for a few good reasons
Businesses that go public issue shares, or some ownership in their enterprises, for anyone to purchase. Those shares, called stocks, give buyers (stockholders) a slice of the company and a share in its profits. Most companies sell their stock on major exchanges, such as the New York Stock Exchange or NASDAQ (National Association of Securities Deals Automated Quotation system).
Shares are sold around the world on the open market for a few good reasons:
- A business wants to raise extra cash for research and development, expansion, etc.
- Corporations in the stock market remain in the public eye, without hefty advertising fees.
- Companies gain valuable visibility, name recognition and branding power for their products.
As the economy grows and a company earns more money, its stockowners, or investors, profit along with the company. Of course, if things go awry, stockholders suffer, too. Buying shares in American or foreign companies can be risky, but opens an avenue for possibly striking it rich.
Investors can earn money on their shares in several different ways:
- Some companies pay dividends, or a portion of its profits,to investors
- Stocks often appreciate over time; that is, sell later for more than the original price.
- If stock is purchased when its price is low and sold when it’s high, a nice profit can be made.
- Stocks sometimes split into two or more shares, doubling or tripling an initial investment.
Through the years, the stock market has been more profitable than other investments, but the market rarely makes anyone a millionaire overnight. Financial gurus often advice clients to invest in stocks for the long haul. A good rule of thumb: Plan to leave your stock purchase untouched for at least five years.
For more advice on investing in the stock market, contact Certified Financial Advisor Ron Van Surksum at firstname.lastname@example.org
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