The stock market is one of great ways to invest your money. The risk and return varies from one company to another, and if you are familiar with this, it is one way to entertain your brain. But the big question is, how does stock market works?
The Basics.
Have you been to the food market? Stock market is just like that, but instead of buying food, you will be buying shares of stocks from different companies like PLDT, Jollibee, Camella and many more.
When you buy shares of a certain company, you become a shareholder. Buying a company is very expensive, that is why stocks are divided into a number of shares depending on how much they allow. You can buy a share of a company for as low as P1, but there are also stocks that cost thousands. That would depend on the company and the risk you will incur. For consistently high performing companies, their stocks are usually more expensive than the new ones.
So what does the company gets from selling shares? Selling shares in the Stock Market is a good source of added capitalization. This means that if you buy a share, you are basically giving them money to make the business grow.
The Income.
Of course, you are buying shares not just to give them money to grow their business but also for you to grow your own money.
One of two ways to earn money in stock is buy and sell. This is a riskier option but has more potential of earning if you do it right. If a company has high sales or doing really good in terms of profit, very few shareholders would want to sell their own shares. You can profit from this by selling your share at a much higher price than what it actually cost. On the other hand, if the company has problems that may result in a devaluation of shares, more would want to sell their shares causing the price to go down that the actual cost.
Earning through buy and sell takes a lot of effort and hard work. You have to consistently look at the trend, be updated with the news and be quick on your feet to decide which stocks to purchase that might gain you a better opportunity when selling in the future. It takes a lot of time, and possibly money, to learn how to do this. But when you master this skill, the income has endless possibilities.
Another way of earning is through dividends. This is a safer way to earn money through stocks, but has less opportunities than buy and sell. Dividends are the company’s profit divided into the number of total shares. Unlike the first one, you won’t have much control on how and when you will earn. This entirely depends on the company you are buying shares from.
If you are someone who doesn’t have time to do analyzation, or is too busy to be updated with current events, then this is a better option for you. Income is not too much and not regular at all since some companies don’t give out dividends often. Do a little research and see which companies are consistently performing and are known in giving out dividends regularly and invest in them. This would require less effort while still allowing you to earn.
Interested in participating in the stock market? Read our Step by Step Guide to Invest in Stock Market.
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