How does buying a stock works?

Answer 1

Buy low, sell high.

The value of the stock is based upon the market price, which is the last price that somebody pays for it on the market. Buyers "bid" a price and sellers "ask" for a price. When buyers and sellers bid and ask are the same, a transaction takes place.

Investors are buying and selling a fraction part ownership of a company. You are entitled to the pro-rata amount of dividends, voting and residual value of the share. The value of the share is a bit esoteric with many different methodologies. But most valuations basically look at future earnings, cash flows and/or net fair asset valuation to determine value.

You buy shares that you think will have good prospects in the future and avoid the ones that you think don't. Remember, shares are different than companies - you can have a great company and a horribly expensive stock that goes down and visa versa.

Operationally, you open an account, find a stock you like and then put a "bid" out there to buy a stock at a price that you like. This is called a limit order. Otherwise, you can put a "market" order - which will reach up to the ask on electronic markets (e.g. NASDAQ) or go down to the specialist as a market order on floor-traded markets (e.g. NYSE for non-hybrid traded shares).

This doesn't necessarily mean that buying shares are right for you as mutual funds are usually the best place to start for beginners. However, this is functionally how it works (broadly).

Answer 2

Basically when you buy stocks, you're buying part of a company. When you do this, you literally own a portion of a company, although you own only a very small portion. A person who owns stocks in a company is called a shareholder.

Although you as a shareholder can't help make day to day decisions, you do have some say in the company, such as voting for a new board of directors etc. When the company makes a profit, you earn a part of that profit. If the company loses money, you're affected too.

Any company, such as Microsoft, that trades publically on the Stock Market has many thousands of shareholders, who all own just a tiny piece of the company. Bill Gates is the majority owner of Microsoft and runs the company along with a board of directors.

Buying stocks can make you rich, if you invest wisely. Likewise it can do the opposite. So be smart!

Answer 3

Here's a fake Game-styled stock place where you can learn how to buy and sell shares of stocks with the actual sales of movies by trying to predict which movies are going to be the best sellers.

I am also only just learning about investing.

Good luck!

Answer 4

Here is a good page to learn investing for beginners:
http://www.best-stock-trading-systems.com/internet_stock_investing.html

Answer 5

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Good Luck and Best Wishes!