Stocks Explained In Easy To Understand Terms

Since I started this blog last September 2011, there are several people mostly my friends who would ask me to explain what a stock is. I sometimes give then links to articles I have read explaining what a stock is and how you can earn from the stocks you invest to. Unfortunately, some are having a hard time understanding those technical terms especially those who did not take business related courses like me. So, let me share you one simple explanation I have read from one of Bo Sanchez's books, My Maid Invests in the Stock Market. We will have a short role-play Let's say I am your friend who will be starting my little business. I want to sell candies. Starting any business needs a capital or the money you will use to buy the things you need for selling business. As an initial fund I need 10 dollars. [panel-image src="http://moneygizmo.net/wp-content/uploads/2013/01/stocks-made-easy.jpg"] [impt text="But, I have a problem"] I only have 9 dollars in my pocket. I cannot buy all the things I need to sell candies and earn money, so I ask you to INVEST in my business. [panel-image src="http://moneygizmo.net/wp-content/uploads/2013/01/10-dollars-needed-for-a-business.jpg"] You will LEND me that 1 dollar and in return I will make you PART-OWNER of my business. Since you invest 1 dollar out of the 10 dollars capital, you own 1/10 part of the business or 10 percent. [impt text="Business was very good"] Fortunately, a lot of people liked the candies and the sales is very good. After one month, the initial capital of 10 dollars grew to 100. [panel-image src="http://moneygizmo.net/wp-content/uploads/2013/01/how-to-earn-your-first-million.jpg"] [impt text="So, what now?"] Remember you still own 10 percent of the company. Using a little math, 10 percent of 100 dollars is 10 dollars or 100 dollars divided by 10. [impt text="You invested 1 dollar only"] Yes that's right. Your single dollar grew to 10 dollars or ten times the value in just one month. This is basically the idea in stock market investing. [impt text="You buy ownership of a company"] In stock market investing, you purchase stocks or ownership of the company. The amount of ownership depends on how many stocks you buy from the company. You then wait for the company to grow its capital for several weeks, months or years. And if the business makes pretty good income, you benefit from it as well. [panel-image src="http://moneygizmo.net/wp-content/uploads/2013/01/stock-means-ownership.jpg"] [impt text="Makes you happy, right?"] Let me warn you before you jump right away. Stocks investing is one of the very risky financial instruments out there. You can earn as much as you can lose. This ends this short article explaining stocks as simple as possible. If you still have questions related to this article, please use the comment section below and I will be happy to help you. Happy stock market investing. Images from sodahead.com, blog.guden.com, theaveragegenius.net, centerpointbv.com

Mark Hugh Neri

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