Stock represents the value of your ownership in a company; it will be a fraction of the cost of setting up the company and tantamount to your stake in the growing business of the firm. To buy stock means you are buying into the business and you want a share of the profits the business will make in the future.
The company may be manufacturing goods or it may be providing a service, the moment it starts making profits it will be recovering its operational costs and increasing its stock value. At the other end of the spectrum if the business flops the value of its stock (original share price) will decline and shareholders will suffer a loss.
What is the necessity of buying stock?
Suppose you plan to open a small retail store, you will require to rent space, install shelves and provide the basic furniture and buy retail goods and hire a couple of employees. As you commence operations you will need to pay utilities, salaries, transportation and many other expenses. If you have invested all the money yourself and you are able to recoup the expanses from the daily profits you will most probably remain the sole proprietor and stock owner in your retail business.
If you don’t have the cash resources to open a store on your own, you can get other people interested in the business. You can sell shares or stocks in your business to other people in lieu of money they provide and utilize this money to finance your retail operation. The profits will eventually be shared in proportion to the investment each outside individual has made in your store.
Who actually buys the stock?
A small retail store in the neighborhood could probably operate with financial help raised from parents, friends and relatives. Companies that are larger will require outside support from the larger public and from banks and larger financial institutions. This prompts the company to go public.
In such a case the company registers itself on a stock exchange like the NASDAQ or New York Stock Exchange and offers its shares for sale to the general public through an Initial Public Offering or IPO. Through this route anyone located anywhere can buy into the company.
Where do traders, brokers and institutions buy and sell stock?
In a stock market the bulk of the trading is done between shareholders, and institutions that own shares and IPOs are used for for raising money for funding business growth and expansion.
The price of the stock listed in the stock exchange is the market perception of the value of the company’s share, and it can vary a great deal depending on how well the company does business, its performance in a competitive market and many socio-economic and political factors.
How exactly do you go about buying stock?
Stock brokers arrange sale and purchase transactions and advisory services for a fee. Alternatively, you can use online brokerage services provided by banks, where you organize and navigate your stock portfolio, viewing the price variations of your stock every day.
While selling stock you get the current price that could be greater or lesser than your original cost price. This is the risk element in stock trading that will always permeate such transactions even as they assure you far higher earnings than savings accounts and CDs.
What do I do about funding my stock purchases? How will I make up losses?
The loan for vehicle title is one of the safest ways to raise capital resources for a bigger investment. The installment loan in California guarantees you at least 60% of the commercial worth of your vehicle in an emergency cash crunch. The auto collateral loan will not charge interest rates beyond 25% APR unlike payday loans that squeeze people for rates beyond 400% APR. The pink slip is the collateral for a car equity loan and repayments can be adjusted to suit your income status or financial constraints. The ease and accessibility of the auto equity loan makes it the loan of choice for customers whenever they face any cash emergency.