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Insight into the Purchase of Stocks
Basic Guide to Stock Market
For a large number of people, the stock market is a highly complicated mechanism, which is not easy to understand. Thus, we have decided to prepare a concise guide to the world of stocks that will provide an insight into this field.
Stock market: what is it?
The regarded term means a share in the ownership of a company. By purchasing stocks, you gain the right to claim part of the assets and profits of the entity. It goes without saying, the more stocks you have acquired, the more influence in the company you have.
Why do companies issue stocks?
The reason for this quite simple: at some stage in its growth, any firm needs extra funds. To get the money, the management can borrow funds from banks but it might lead to some negative consequences in the future. Issuance of stocks, on the other hand, is quite beneficial for the company because of two reasons: the firm does not have to return the obtained funds, as well as pay certain interest for their utilization.
What are the risks?
You need to remember that an investment in stocks does not imply any guarantees. Some firms pay dividends, but many do not. If the company does not pay any dividends, the only way for the investor to make money is to sell the shares on the market when their price increase. At the same time, you need to remember that the company may also go bankrupt, and you will not be able to get your money back. Of course, it is much better to pay attention to big companies whose success you will not doubt, for instance, Twitch stocks.