Stocks and shares sound like complicated financial terms, but in fact they’re quite easy to understand.
So, What Exactly are Stocks and Shares?
When you hear the words ‘stock’ and ‘share’, they are generally referring to the same thing. Simply, they mean a share in the ownership of a company. If you have stocks or shares in a company, it means you own a proportion of that company’s assets and earnings. If you buy more shares in that company, your claim on their assets and earnings grows.
What do Companies Use Them For?
Shares are used by companies to help raise money. They might use this money for projects and products they are planning, to expand the company, or to pay their staff higher salaries for all their hard work.
Why do People Buy Them?
People from outside a company choose to invest in shares because they want a part of the future profit of that company. If that company goes on to be very successful, this could be an extremely good decision. The profits they would receive are called dividends. Members of the public might also want to buy shares in a company because if the value of these shares rise, they can be sold at a profit.
Should I Buy Stocks and Shares?
If you invest wisely in stocks and shares, you can make serious money from them. It’s very important to understand where you are investing, and what the market is doing at the time you choose to invest. Irresponsible investments can really harm your finances; but good investments can boost them.
Before you take the decision to invest in stocks and shares, you should read up about the stock market in the financial news. Decide what kind of company you want to invest in – this might be something you are interested in, or just something you think is likely to make money in the future. Try and find out something about the company’s plans and about their management team.
If you decide to invest in shares the prices can change widely from day to day and you can even lose your money altogether if the company does not make a profit so you need to be sure not to invest more than you can afford to lose.
Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk