How are Stock Prices Decided Upon?
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.
The other way to make money is through capital gains. This means that you have bought the stock at one price and then sell it at a higher price. The difference between the price paid and the price sold is your capital gains.
Investors are usually hoping to make capital gains when they buy shares of stock. People who are in or nearing retirement may prefer high dividend paying stocks that are stable for a source of income, but for others, dividends aren't where they expect to make most of the money.
Stock prices have to increase if you want to make capital gains. Stock prices vary from day to day, so how do you know that it will go up? What makes stock prices change all the time?
Do you remember the principle of supply and demand that you learned in your high school economics class? It is a basic term that explains the change in stock prices just as the change in prices of any other goods or services.
An increase in supply with the same demand will decrease the price. An increase in demand with the same supply increases the price. The price changes depending on whether and how supply and demand change.
Stock prices change depending on who is willing to buy and sell. If more people want to buy a particular stock than there are enough people to sell it to them, they have to increase the price. If more people want to sell a particular stock than there are enough people to buy from them, they have to drop the price.
If you understand how this works, you can better understand how to make money with stocks. You want to buy stocks that you think a lot of people will be buying in the future so that the price goes up. - 23211
The other way to make money is through capital gains. This means that you have bought the stock at one price and then sell it at a higher price. The difference between the price paid and the price sold is your capital gains.
Investors are usually hoping to make capital gains when they buy shares of stock. People who are in or nearing retirement may prefer high dividend paying stocks that are stable for a source of income, but for others, dividends aren't where they expect to make most of the money.
Stock prices have to increase if you want to make capital gains. Stock prices vary from day to day, so how do you know that it will go up? What makes stock prices change all the time?
Do you remember the principle of supply and demand that you learned in your high school economics class? It is a basic term that explains the change in stock prices just as the change in prices of any other goods or services.
An increase in supply with the same demand will decrease the price. An increase in demand with the same supply increases the price. The price changes depending on whether and how supply and demand change.
Stock prices change depending on who is willing to buy and sell. If more people want to buy a particular stock than there are enough people to sell it to them, they have to increase the price. If more people want to sell a particular stock than there are enough people to buy from them, they have to drop the price.
If you understand how this works, you can better understand how to make money with stocks. You want to buy stocks that you think a lot of people will be buying in the future so that the price goes up. - 23211
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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 @ 12:39 AM
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