How do Stock Prices Change?
When you buy stocks, you have two ways to make money. You can make money through dividends that the company pays for each share you own. For example, they might pay 25 cents per share each quarter. Dividends are not guaranteed, though.
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.
In order to make capital gains, the stock price has to go up. The stock price can go up or down. It varies from day to day. How can you know it will go up and how exactly does it change?
Stock prices are affected just as the price of anything else changes. It is purely economics. Try to think back to your high school economics class when you learned about supply and demand.
It's all based on whether supply and/or demand go up or down and buy how much. An increase in supply will lower the price whereas an increase in demand will increase the price.
With stocks, if a lot of people want to buy a particular stock and not enough people are selling, they will have to raise the price to accommodate for it. If there are more people looking to sell than people willing to buy, they will need to decrease the price to get people to buy.
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. - 23162
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.
In order to make capital gains, the stock price has to go up. The stock price can go up or down. It varies from day to day. How can you know it will go up and how exactly does it change?
Stock prices are affected just as the price of anything else changes. It is purely economics. Try to think back to your high school economics class when you learned about supply and demand.
It's all based on whether supply and/or demand go up or down and buy how much. An increase in supply will lower the price whereas an increase in demand will increase the price.
With stocks, if a lot of people want to buy a particular stock and not enough people are selling, they will have to raise the price to accommodate for it. If there are more people looking to sell than people willing to buy, they will need to decrease the price to get people to buy.
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. - 23162
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Do you want to know how do stocks work? Find out if you should choose the stock market or bond market to invest in.
posted by X - Men @ 12:43 AM
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