Stock is an ownership stake in a company that rises and falls over time depending on the profitability of the business. Stocks can be bought or sold on a public stock exchange, which allows investors to participate in the growth of companies that they might otherwise not be able to invest in directly. Purchasing stock is only part of the process of being a shareholder; once you own the shares, you have to continue to follow the company and its performance. You may also need to rebalance your portfolio from time to time, as different stocks have different risk levels.
Stocks represent a tiny slice of ownership in a company, giving you the opportunity to be part owner of a business whose products or services you love. Most stocks are publicly traded on a major exchange, making it easy for anyone to buy or sell. That makes them a much more liquid investment than other options like real estate that can take longer to sell.
To buy or sell stocks, you need to have a brokerage account. You can choose from a number of different brokers, but the best online stockbrokers for beginners are those that offer low trading commissions. When you’re ready to make a trade, you can use either a market order or a limit order. A market order is better for when you are making a large trade with a very liquid stock and don’t want your trade to move the price too much, while a limit order can be used for smaller transactions or when you are trying to purchase a specific amount of shares without moving the stock price up or down.
When you own a share of stock, it gives you the right to vote on company decisions and receive dividend payments (a portion of profits). Some companies pay quarterly dividends, which can help supplement your income. Some even grow their dividends over time, rewarding shareholders with a steady stream of income that grows as the company does.
Over the long term, stocks have historically returned around 10% a year, although the returns can vary widely from year to year. That’s why it’s important to diversify your portfolio with a range of different stocks and industries. And remember that it takes time to learn how to invest wisely, and it’s often difficult to predict what the stock market will do in the short term. So be patient and keep researching to find the investments that fit your financial goals and risk tolerance.