Why do people buy stocks?

Question

My mom told how she wanted me to buy a stock for extra money but how does that work?

Answer 1

People invest in stocks looking to see a return on their investment. Meaning, you buy shares of say Starbucks stock at $14.23 with the hopes that the company will expand, experience profit growth and your stock will be worth say $100 dollars down the road. This is an extreme example (and in Starbucks's case, not likely) but you get the idea.

As far as looking to invest in stocks yourself, I would suggest two things. First, save money until you have a minimum of $500 to invest. Investing in small amounts on cheap stocks is not going to allow you to see much return on your investment. Second, rather than investing in one particular stock, invest in a mutual fund, which allows you to diversify your investment. This means instead of putting 500 dollars into one company, you spread it across several companies through a mutual fund. That way, if one company tanks, you will not lose your entire investment.

Do a little research into mutual funds that have a low initial investment, or ask your parents if they have any current mutual funds that you could also invest in.

Good luck!

-Paige

Answer 2

To try and make money.

Stocks are like gambling.  You buy a portion of the company and hope the business does well.  If it does you make more, if business gets bad you lose $$$.

Answer 3

are you serious?

Answer 4

There's a few ways buying a stock makes you money.  One way is, if you buy a stock and it goes up, you make money off the increase(ie, you buy 100shares of stockin in a company, and the price goes up $5 and you sell it, you get a $500 profit).  Another way you get money is if the stock pays you out a dividend.  A dividend is usually a small cash payment the company makes to it's shareholder.  Let's say you own 100 shares of stock, and the company decides to pay out a .10 dividend every 3 months.  So,. that's .10X100sharesX4 payments= $40 per year.  Not every company does this though, so it's always good to research this before you buy a stock if you want one that does pay out a dividend.

Answer 5

People invest there money because they believe that they will get a return on their investment. The prices of stocks change everyday, based on how the market is doing, how that particular sector of the market is doing, and how the individual company is doing. People try to make money by buying a stock that they believe will go up in value. When or if it goes up, they sell it and pocket the extra money in between. let's say you buy 100 shares of McDonalds for $50 each. If in a year they go up to $55 each and you decide to sell, you have made $500. 100 x $5 = $500. However, the price of stock can go down too. Let's say McDonald's stock goes down to $45 a share. You have lost $500. 100 x -$5 = -$500. Basically people are trying to guess which stocks will go up. They can accurately guess this by looking to see how the company is doing, what plans they have for the future, and many different factors. There are also many different ratios to determine if you are paying to much or too little for a piece of stock. While it may seem easy to do, there are so many variables involved, the only guaranteed way to make money, is to make a smart estimate on which companies will do well, which is difficult to determine, unless you can predict the future.

Answer 6

simple: to make money (greed)

i can't think of another reason why would anyone want to buy stocks

Answer 7

Generally people buy stocks to make money, whether through capital gains or dividend income, or a combination. But my philosophy is if you don't know why you are doing something, then don't do it. However, you can ask a real professional financial advisor, and perhaps he/she can steer you in the right direction.

Answer 8

This is the simplest site I found.

One of the many reasons people buy stocks is because people want to invest their money.  You make money in the stock market when people buy  products from the company in which you own shares, and that company then makes a profit.  If you had stock in Nike and Coca Cola  and the stock price goes up, you make money.  

    Buying stocks is a gamble.  The reason it is a gamble is because you can lose money if people stop buying the company's product and then the stock price goes down.  Yet, you can make a fortune if the price goes back up.

Answer 9

In hope to make money.

Answer 10

Think\of stocks as the corporations that they are. Take  a company like Monsanto or any major US company you know, maybe McDonalds, I don't know. Now the whole ethic of that company's management and work force is to make a profit, a good profit, in order that the executives earn high salaries, pensions, bonuses etc. In order to continue making a profit that company, or its work force is striving, to grow or expand and spread geographically. So one year it makes a profit of x US$ and the following year x+10% US$ and so on. As a shareholder you receive part of this profit as dividends (which hopefully grow each year and you own part of an expanding and therefore more valuable asset. This assumes you invest in a successful company, which is the art of portfolio management and where stockbrokers come in.

Answer 11

There is few good answers here. Let me add some historical facts.

Historically, the real reason why people buy stocks is because stocks have shown to be the better hedge against inflation over the long term.

A lot of people don't don't think in these terms but it's really what they are doing.

They want to have more money in the future, for retirement right? They know cash, Cd's etc., won't buy as much in the future as it does now right?

Why is that?

Inflation eats away they buying power.

How to get ahead of inflation? h

Historically speaking, it's been in stock and real estate investing.

Answer 12

Your mom does not understand

IT'S A BEAR MARKET.

Wanna lose a lot of money?

Buy stocks