Can someone please explain stocks to me. (In layman's terms please)?

Answer 1

The backbone of capitalism. You share in the risks, you share in the rewards.
I want to start a business but have no money. So,I sell 10.000 shares(we call this stock) at 10.00 each to raise money to start up.
You buy 100, you own 1% of the company.(( we call this EQUITY))
Ok, we get going and do well, and after 1 year, we show a profit of $ 10.,000.00( We call this EARNINGS.
We decide to hang on to half) we call this RETAINED EARNINGS), and pay the half to the investors.Are you with me?
5000.00 will be paid to the investors.
So . that works out to 50 cents a share. This is a DIVIDEND. You own 100 shares, so we'll send you and. check for $ 50.00.
Now, you decide to sell your stock. You can't sell unless you can find a buyer.
Since the co is making a profit and paid a dividend, that's not hard to do. People are willing to pay $ 11.00 a share. So, 11,00 x 100 is 1100.00. You accept the offer, so here's your check for $ 1100.00. You made $ 100,00.This is called a GAIIN.
Npw,let's go back. You want to sell, but the co is doing poorly. The best offer you get is .$ 6.00 as share. So here's your check for $ 600.00., you lost $ 400.00.
This is a LOSS.
This isn't for everybody. You can do well, you might not do well. This is RISK.
I hope this helps you.

Answer 2

Stocks are a representation of a portion of ownership into a company. When you purchase a share of stock you own that percent of the company that issued the the stock based upon the number of outstanding shares. For example, if the company issued 100 shares, you would own 1 percent of the company. If you owned 10 shares, you would own 10 percent.

The benefit of owning the stock is that as the company grows so does the value of the stock. Let's pretend you and three of your friends opened a lemonade stand. Each of you put in $25 for a total of $100 to purchase the cups, lemons, sugar and everything else you need to operate the stand. Let's then pretend each $1 put into the business by each of you represented one share of stock, so all of you would own 25 shares of stock.

After running the company for a year your lemonade stand earns $1,000. If you closed the stand and divided up the money then each person would get $250, or 25 percent share of the profits and your stock price would have increased from $1 to $10.

Companies issue stock so that they can raise capital (money) to either start or grow a company. The benefit of issuing stock is that like in the example above several people can pool their money together to get a business going and spread out the risk. If your lemonade lost money such as paying somebody to make a sign to advertise, or to pay somebody to operate the stand, and you didn't sell enough lemonade to cover the costs the value of your investment would decline. However, you could only lose a maximum of $25 whereas if you had opened the business by yourself you could lose all $100.

The drawback is that you have to share the wealth. If you didn't split the company with your friends and invested the $100 you would get to keep the $1,000.

Answer 3

The Dow Jones is an index, which purely skill that it fairly is a set of commercial companies (companies THAT MAKE STUFF) and the kind is how plenty their inventory costs upload as much as. standard & damaging's have an index of 500 companies stated as the S&P 500 it rather is a enormously stable benchmark for how the industry is doing additionally. NASDAQ is a procuring and advertising midsection for regularly technologies & provider companies based in Chicago, as against the long island inventory substitute (NYSE) that's on Wall highway in long island city.What inventory is would desire to be a greater suitable question. it fairly is a share, or a share of the finished value of a business enterprise. the upward push or fall of the inventory cost is a transformation contained in the perceived money value of that agency.

Answer 4

To break it out on the highest level, a share of stock is a percentage ownership in the company. If you own half the stock, you own half the company.

Answer 5

It's owning a piece of a company. If the company does well, the vlaue of your piece goes up(plus you could get paid regular dividends-- your share of the profits), but there is also a risk that the company could do less well and the value goes down or they go completely out of business. Still, it 's better than gambling. That's rigged against you, and its usually money down the drain.

Answer 6

A stock is an investment product that represents partial ownership of a company or corporation. The stock market repr
esents all the companies that sell shares to the public. It is the primary place for companies to obtain financing for their operations and for investors to profit on the growth of those companies. There is therefore a close relationship between the stock market and the economy as a whole.
Let's say you have a hot dog stand. The stand is selling more hot dogs than you can make. So you need money. You sell your friends a part of the hot dog stand to get the money you need to expand. You have just sold them stock in your hot dog stand.

Thousands of companies in the United States, known as public companies, invite you to become part owners. They do this by selling shares of the company. When an investor buys a share of a company, he or she receives a stock certificate or additional documentation that proves stock ownership. If stock shares are purchased through a brokerage firm, the broker holds the stocks in "street name", which means the brokerage firm maintains the paper-work that proves stock ownership.

It has been said that when it comes to ownership, a public company is the most democratic institution in the world. It is an example of true opportunity. Investing in public companies is the way many people can participate in the growth an prosperity of a company. Selling stock also benefits the company. When a company sells shares, it uses the money to open new stores, build new factories, or upgrade its merchandise so it can sell more products to more customers and increase its profits. As the company becomes larger and more prosperous, its shares become more valuable. There is no guarantee, however, that a publicly-traded company will be successful. A company with a great deal of money raised from the public can suffer serious setbacks or even be forced to close its doors because of a variety of factors.

There are baically two types of stock: common and preferred.

When an investors own a public company's common stock, they are entitled to vote in the election of company officers as well as other important matters, and they often receive dividends on their shares. Since common stock is often riskier than preferred stock, it offers greater potential returns an losses.

Shareholders of preferred stock would not usually have voting rights, but would receive a fixed dividend, or share of a compan's profits, which is paid to preferred stockholders before common stockholders are paid. However, owners of preferred stock pay for that privilege-usually their dividends would't increase when the company's profits increase. When a company does well, the price of its preferred stockholders recoup their investment before common stockholders.

The stock price is the amount an investor pays for one share of a public company's stock at a given moment. Outside events can make a company's share price rise of fall. Other forces that ca affect stock prices include interes rates, national and international issues or events, foreign exchange rates, financial forecasts, and new technologies. Retail stocks are subject to declines during recessions.

Dividends are the distribution of a compan's profit or earnings to the company's shareholders or stockholders-the people and firms that have purchased that company's stock. Dividends are another way that you can share in a compan's growth; they are usually distributed quarterly. Most companies offer a dividend reinvestment plan, which means that instead of paying you by check or depositing the money into your account, the amount of the dividend is used to buy more shares of the company's stocin your name. This is a good way to increase your investment in the company over time.

The terms large-cap, mid-cap, and small-cap refer to the issuing compan's market capitalization, that is, the overall value of all shares of the company's stock.

Growth stocks are shares of companies exhibiting relatively fast growth in earnings, which generally causes the stock price to go up. Be certain you understand that growth stocks are the most volatile and can fluctuate rapidly because growth companies are typically in new, or fast growing, industries such as the high-tech sector. Growth stocks are considered riskier and ofter pay lower or no dividends, but appeal to investors who will accept more volatility and risk in hopes of greater appreciation in share price over time.

Income stocks, on the other hand, are characterized as those that would apy high and regular dividends. Stable and well-established industries, including utilities and financial institutions, typically produce income stocks.

Blue chip is the name applied to the stock of large, well-known, well-established companies with good reputations.

Value stocks are those considered to be selling at lower prices or "undervalued" because the companies that issue these shares have had business setbacks or are out of favor with investors. Value stocks have been known to outperform growth stocks in slow markets-and vice versa. But there is still a risk with value stocks because not all companies recover from setbacks.

You can learn more about investing in individual stocks by visiting such Web sites as Valueline http://www.valueline.com and the Motley Fool http://www.fool.com . Remember to always make up your own mind about investing based on what makes sense to you-not solely on the opinion of someone else.