How do Stock Prices Work?
There are basically two main ways to profit from buying stocks. First, many corporations pay dividends to their shareholders. They may pay 50 cents per quarter for each share you own. This is not required of a corporation, so you may or may not be paid dividends.
You can also earn a profit through capital gain. When you buy stock, you will pay a certain price. If in the future the price goes up, and this is what you want it to do, you can sell it and make a profit. Subtract what you paid for what you sold it for and this is your capital gain.
When investors purchase stock, they are doing it in hopes of making capital gains. Those in retirement usually look for dividend paying stock because it is a stable source of income. Otherwise, dividends are just a bonus to the investment.
Stock prices have to increase if you want to make capital gains. Stock prices vary from day to day, so how do you know that it will go up? What makes stock prices change all the time?
Do you remember the principle of supply and demand that you learned in your high school economics class? It is a basic term that explains the change in stock prices just as the change in prices of any other goods or services.
When the supply increases and the demand stays the same, the price will decrease. When the demand increases and the supply stays the same, the price increases. They vary inversely and the price adjusts along with them.
Stock prices change depending on who is willing to buy and sell. If more people want to buy a particular stock than there are enough people to sell it to them, they have to increase the price. If more people want to sell a particular stock than there are enough people to buy from them, they have to drop the price.
Understand supply and demand and you can understand what to look for in a stock. You want a higher price after you buy, so you want more people wanting to buy later on. - 23222
You can also earn a profit through capital gain. When you buy stock, you will pay a certain price. If in the future the price goes up, and this is what you want it to do, you can sell it and make a profit. Subtract what you paid for what you sold it for and this is your capital gain.
When investors purchase stock, they are doing it in hopes of making capital gains. Those in retirement usually look for dividend paying stock because it is a stable source of income. Otherwise, dividends are just a bonus to the investment.
Stock prices have to increase if you want to make capital gains. Stock prices vary from day to day, so how do you know that it will go up? What makes stock prices change all the time?
Do you remember the principle of supply and demand that you learned in your high school economics class? It is a basic term that explains the change in stock prices just as the change in prices of any other goods or services.
When the supply increases and the demand stays the same, the price will decrease. When the demand increases and the supply stays the same, the price increases. They vary inversely and the price adjusts along with them.
Stock prices change depending on who is willing to buy and sell. If more people want to buy a particular stock than there are enough people to sell it to them, they have to increase the price. If more people want to sell a particular stock than there are enough people to buy from them, they have to drop the price.
Understand supply and demand and you can understand what to look for in a stock. You want a higher price after you buy, so you want more people wanting to buy later on. - 23222
About the Author:
Do you ever ask, "how do stocks work?" Don't stay confused. Find out how stock prices change from day to day.
posted by X - Men @ 12:38 AM
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