What Are Stocks? And How Do They Actually Bring You Money?

Money is great. Spending it is especially fun. However, it gets to a point, hopefully very early on in your life, where you realize that you need to start growing your finances. If you can figure out additional streams of income, that’s great. There’s also an option you should consider. Investing. You’ve probably heard about stocks and the stock market. Here is an explanation that shouldn’t be hard to wrap your head around.

What Is A Stock?

A stock is a piece of a company. When you buy the stock of a company, you’re effectively buying into the ownership of that company. If a single person owned all of the ownership shares (stocks) of a company, they would own the entire company.

Stocks are usually bought and sold among individual investors. This means that when you buy stock, you can sell that stock to any other person interested in investing in ownership of that particular company. Stocks are usually bought and sold on behalf of investors by stock brokers.

Why Do Companies Sell Stocks?

Companies sell shares in their business in order to raise money. That money is then used for various initiatives. Companies may use this money to finance new products or product lines, or to invest in growth, expand their business or even pay off debt.

Companies make their shares available for purchase through a process called an Initial Public Offering (IPO), but you don’t need to worry about that. Once a company’s stock is on the market, it can be bought and sold among investors.

How Do You Earn Money From Stocks?

The only reason any of us is going to consider owning stock is to make some money. Stock make money in two ways. The first, is just through trading of the stock. Depending on how well a company is doing stock prices will go up. This is referred to as an appreciation of the stock. And it means that, you can simply flip the stock that you’ve already bought for a profit. Just sell it.

The second way that you can make money from a stock is through the dividends that the stock pays. Dividends are payments made to shareholders out of the company’s revenue. Usually they’re paid quaterly (that’s every three months). You should note that not all stocks pay dividends.

In order to start trading in stock, you need to go to a licensed brokerage and open a trading account. Here is a list of licensed brokerages in Ghana.


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