What actually are shares and how do i go about buying and making money from them?

Question

I literally know nothing about this so in idiot's terms please! :)

Answer 1

If a company wants to raise money, it can sell itself, literally, in pieces called shares. They get the money once called an IPO auction. The new owners (which can be thousands of different people) vote on board members. The amount and type of shares determine how much power a stock holder has with the company. If they have enough shares they can litterally run the company (called a take over) because they could litterally vote themselves as a board member or even CEO.

You can purchase shares directly from the company or through a stock broker (online or over the phone). Most shares are now electronic so no more fancy paperwork. You can buy stocks directly, a basket of different stocks called ETFs or join other holders in a mutual fund where a guru or a team of gurus decides what to buy, hold and sell.

You may or may not make money from stocks. It's best to buy what you know, buy what will last or grow and then hold through thick and thin (up to 7% loss of your original investment and then sell) untill it's at a price where you think it has topped or you are ready to sell (for instance you bought stocks now to pay for a car later).

Answer 2

A "share" in a company is literally that - you are buying a share of the company's profits and a say in how it is run.

Think of this example...

You own a restaurant that's doing well. You want to expand the restaurant so you can seat more customers. This will cost £100,000. You could borrow this money from the bank and pay them back with interest. Or, you could raise the money by offering 100,000 "shares" (at a cost of, say, £1 each) in your restaurant to the general public.

You don't pay your shareholders interest, but if the restaurant continues to do well you pay them a share of the profits (called a "dividend").

The value of each share will go up and down depending on many different factors, but particularly on how much money the restaurant is making.

That's basically how shares work in a nutshell.

Now, rather than selling the 100,000 shares directly to people yourself (that could take a lot of time & effort!) you list them on a stock MARKET.

The easiest way to buy and sell shares these days is to use the internet. Have a look at www.etrade.co.uk.

Hope this helps...

Answer 3

Shares are 'parts' of a company. Most companies are owned by many people who each have 'share' in the company. You should not buy with-out fully understanding all issues involved, but when you do, your bank or financial adviser will point you in the right direction.

You make money from them by either buying cheap (when no one else believes in the company or their products) and sell high (when everybody wants to jump onto the band-waggon); or longer term by finding good companies that make good profits (which they share with you in dividends), that grow slowly but steadily whilst giving you income.

Don't put all your money into one company, the wider the spread (many different company shares), the lower (in relative terms) the risk.

Research your companies thoroughly and don't 'bet' money that you are not prepared to loose. Even the 'experts' don't really know what is going to happen, so you have as good a chance as them if you know your subject.

Answer 4

A share is exactly what it sounds like: a share of a company that is owned by many, many people. Companies sell a piece of ownership in their company to raise money, rather than going to a bank and borrowing it. In order to do that, they divide the ownership in their company into many (usually millions) of individual shares, and make some portion of those shares available for sale on a major stock exchange. The first time they do that, it is called an Initial Public Offering, or IPO for short. That process is handled by big investment banks and stock brokers, and is called, "going public". From then on, those shares are traded on the major stock exchanges, and you and I can buy some, if we believe the company will make lots of money in the future.

The major stock exchanges are big markets where people who want to sell some of their shares offer to do so, and people who want to buy shares offer to buy. If I want to buy shares of General Motors, because, maybe, I think they are starting to turn their business around, and the shares will be worth more in a year or two than I can get them for now, then I call up a broker with whom I have an account, or log onto my account at an online broker, and place the order to buy, say 100 shares at $30 a share. If someone who owns shares is willing to sell at that price, then the broker will complete the deal.

If I am right, and General Motors starts to earn more money in the next few years, then I will be able to sell my shares for more than I paid for them.

You can go online and open an account with Scottrade, or one of the other discount brokers, send them some cash to fund the account, and youj're in business.

Answer 5

we all must realize shares are money paid to finance a company, the company makes a profit and the share holders get a equal amount per share they own, if they own more shares they get more of the profits.We see it on TV a lot and somehow we know it is important. How it works I have know idea.

Answer 6

first and most important,
don't spend more that you can afford to lose.
i have just lost a lot by not watching what was happening to mine but i am not worried as they will probably go back up again.
if you like a company and see that it seems to be doing a lot of business contact a stockbroker, probably in the yellow pages , or on the financial pages of a newspaper........and instruct him to buy them for you.
i have 500 Next shares because they give me a 25% off voucher once a year and i go to next and spend lots and save 25%

Answer 7

Hi, i know what your question means. i also think stock market is a nice place for investing.

I found some useful tips in stock trading. It includes stock basics, how to protect your profit, find a potential increase share, control and manage stock risk, when to sell/buy stock and so on.

http://www.bernanke.cn/stock-trade/

Best Wishes && Good Luck!

Answer 8

first find a stock broker and decide what sort of stock you want buy and stock broker will buy it for you.

Answer 9

read tips and articles on investing and stocks on this site