How do Stock Prices Change?
There are basically two main ways to profit from buying stocks. First, many corporations pay dividends to their shareholders. They may pay 50 cents per quarter for each share you own. This is not required of a corporation, so you may or may not be paid dividends.
You can also earn a profit through capital gain. When you buy stock, you will pay a certain price. If in the future the price goes up, and this is what you want it to do, you can sell it and make a profit. Subtract what you paid for what you sold it for and this is your capital gain.
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?
The price of stocks goes up and down the same way that the price of anything else goes up and down. It is an economic principle of supply and demand. Maybe you remember that from your economic class.
When the supply increases and the demand stays the same, the price will decrease. When the demand increases and the supply stays the same, the price increases. They vary inversely and the price adjusts along with them.
The price of a stock will go up if there are more people wanting to buy than willing to sell. The price of a stock will go down if there are more people wanting to sell than there are willing to buy.
Understand supply and demand and you can understand what to look for in a stock. You want a higher price after you buy, so you want more people wanting to buy later on. - 23221
You can also earn a profit through capital gain. When you buy stock, you will pay a certain price. If in the future the price goes up, and this is what you want it to do, you can sell it and make a profit. Subtract what you paid for what you sold it for and this is your capital gain.
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?
The price of stocks goes up and down the same way that the price of anything else goes up and down. It is an economic principle of supply and demand. Maybe you remember that from your economic class.
When the supply increases and the demand stays the same, the price will decrease. When the demand increases and the supply stays the same, the price increases. They vary inversely and the price adjusts along with them.
The price of a stock will go up if there are more people wanting to buy than willing to sell. The price of a stock will go down if there are more people wanting to sell than there are willing to buy.
Understand supply and demand and you can understand what to look for in a stock. You want a higher price after you buy, so you want more people wanting to buy later on. - 23221
About the Author:
Do you ever ask, "how do stocks work?" Don't stay confused. Find out how stock prices change from day to day.
posted by X - Men @ 12:45 AM
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