What is Stock Market?
Have you been curious about stock market and wanted to find out more? You’ve most likely heard about Warren Buffet or Benjamin Graham, who started really early in their lives and achieved an overwhelming success. Do you think you could be as successful as them one day? Keep reading and you will learn basic terms, and some facts about stock market investment.
What is stock market and how does it work?
Stock exchange is an institution, where you can buy and sell stocks and shares of companies that are on the market. In other words, you pay to be a part owner of a company. There are many different facilities like this, but the most popular one is NYSE (New York Stock Exchange), established in 1817.
As I mentioned before, Warren Buffet started investing as a teenager. Today, he’s 89 years old and is one of the richest men on this planet. He owns shares in huge corporations everyone knows worldwide (for example Coca Cola). How did he achieve such a massive success? Well, he definitely possesses extensive economic knowledge, as this is his academic background (one of his teachers was Benjamin Graham), however, he has been gaining experience and building his empire for many years.
How do you make money on stock market?
There are a couple of different investing strategies, but there are two main sources of income from stock exchange investment:
- Dividend – some companies pay their shareholders a certain amount of money periodically. They can pay you monthly, every couple of months, or yearly.
- Selling your stocks – you can sell the stocks you bought, with a profit. It is up to you, when you sell them, however, the best moment may be when you predict that the price would drop significantly in the near future. Just observe the market and analyze it, or hire an advisor.
Can you generate passive income from your investments? Of course! If you buy stocks not to sell them, but to keep them and collect dividend. You can use the money you made and invest it further in stocks.
How do you buy shares?
Shares you bought become a part of your investment portfolio (a collection of your assets). You can build and manage it in different ways.
- Brokers – find a company that offers brokerage services and hire a broker, who would organize transactions between you and the seller. They are licensed, experienced, and qualified to be your advisor. It is an expensive solution, as they get a commission from every transaction.
- From a company – some of the companies sell their stocks to the investors directly. As there is no broker, this is a much cheaper solution.
- Apps – if you are an absolute beginner, you will probably be interested in the investment applications (for example Stash, Robinhood, or Acorns). Some of them don’t charge commission.
Your choice depends on the money you want to invest and your experience.
Is it taxed?
Of course, like every profit you make, stock income is regulated and taxed. The rate depends on a country. It doesn’t matter if you made your income from selling or from dividend, you have to pay taxes anyway.
I hope you liked today’s post and learned something about investing. If you’re interested, check out our other posts.