After controlling your expenses, paying back debts and saving money, the next step in your journey to financial freedom is to start investing! What’s one of the best and most common investment vehicles nowadays? Stocks! Now, if you haven’t had the time to study what stocks are and if you want to learn the basics, then we have a short guide for you right here!
What are Stocks?
Imagine you and nine of your friends want to start a business so you each equally contribute around P1,000 in cash, equipment, materials and more. In that business, you each decide to share the profits and ownership equally. In that scenario, it will be similar to the business having 10 shares of stock and each of you own one.
Stocks, which also called “shares” or “equities,” signify shares of ownership in a company. The Stock Market is the place where these shares are traded. If, for example, a certain company issues 10,000 shares of stock outstanding and you bought 100 shares, you become a stockholder and you own 1% of that company (100 is 1% of 10,000).
Like the example above, if you’re a stockholder you own part of the company’s assets AND you might also receive a part of the company’s profits in the form of Dividends. Some companies don’t give out dividends and simply reinvest earnings though, so in those cases you earn money when you sell them after the stock price goes up (capital appreciation) or when you perform a short sell. [Read more…]