We bet you have always wondered how the stock markets work. To understand the process of stock markets, you need to understand what a stock is and how to buy or sell one. So what exactly is a stock and how does it help investors? These are the questions that are often raised by people in the online forums because they hate to ask it to another person.
Stocks offer investors the greatest potential for growth (capital appreciation) over the long haul. Investors willing to stick with stocks over long periods of time, say 15 years, generally have been rewarded with strong, positive returns. But stock prices move down as well as up. There’s no guarantee that the company whose stock you hold will grow and do well, so you can lose money you invest in stocks. For more information and articles regarding stocks and investments, please visit www.growingsavings.com.
It is also important for you to understand what a bond is. The term bond plays a very important role among the investors. What is a bond? Borrowers issue bonds to raise money from investors willing to lend them money for a certain amount of time.When you buy a bond, you are lending to the issuer, which may be a government, municipality, or corporation. In return, the issuer promises to pay you a specified rate of interest during the life of the bond and to repay the principal, also known as face value or par value of the bond, when it “matures,” or comes due after a set period of time. This risk associated with bonds are lesser than when it comes to stocks and requires less attention.
Possible Fluctuations
No firm is steady as we see it. Any company can collapse if the market goes dull. Even when companies aren’t in danger of failing, their stock price may fluctuate up or down. Large company stocks as a group, for example, have lost money on average about one out of every three years. If you have to sell shares on a day when the stock price is below the price you paid for the shares, you will lose money on the sale.
Market fluctuations can be unnerving to some investors. A stock’s price can be affected by factors inside the company, such as a faulty product, or by events the company has no control over, such as political or market events.
Stocks usually are one part of an investor’s holdings. If you are young and saving for a long-term goal such as retirement, you may want to hold more stocks than bonds. Investors nearing or in retirement may want to hold more bonds than stocks.
The risks of stock holdings can be offset in part by investing in a number of different stocks. Investing in other kinds of assets that are not stocks, such as bonds, is another way to offset some of the risks of owning stocks. For up to date information regarding stocks, take a look at www.growingsavings.com.