If you want to invest in stock market, first you should understand how the stock market works . Buying a share or stock of a company simply means you are buying a unit of the company. Investors are able to buy the stocks of the company once the company share is launched in the market.
How does stock market work ?
Stock markets are a way for companies to raise the money they need to grow their businesses. They could choose to raise this money by taking on debt – but then they would have to pay a large amount of interest on that debt. Instead, they may choose to give away some of the company to strangers by “floating” the company on the stock exchange. The people who buy these shares become part-owners of the company.
Why do people buy and sell share ?
When the price of a stock goes down, sellers are more aggressive because they are willing to sell at a lower and lower price. The buyers are also timid and only willing to buy at lower at lower prices. The price will continue to fall until the price reaches a point where buyers step in and become more aggressive and willing to buy at higher prices, pushing the price back up.
Trying to predict which stock will rise or fall, and when, is very difficult. Over time stocks as a whole tend to rise, which is why many investors choose to buy a basket of stocks in various sectors (this is called diversification) and hold them for the long-term. Investors who use this approach do not concern themselves with moment-to-moment fluctuations in stock prices. The ultimate goal of buying shares is to make money by buying stocks in companies you expect to do well, those whose perceived value (in the form of the share price) will rise.
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