Moses Ayiku, Jr. MBA OP/ED
We have spent the past few weeks providing insights on starting a new business. Understandably, this is not for everyone. There is a lot of work involved and it requires a very high level of time and dedication. With the existence of financial markets, especially the stock market, there is an opportunity for many of us to have our money work for us!
Stocks may seem complicated initially. Our focus is to explain how the market works and provide basic information that can assist current and potential investors. It is vital to have a working knowledge of the market before spending money there. Too many people have lost large amounts of money simply because they skipped learning about the financial markets. It cannot be overemphasized that knowledge must be acquired before you start investing your precious money on the markets.
The stock market can be classified as a financial market where stocks are bought and sold. That is exactly what a stock market is! It allows people who own listed stocks to sell them. People who also want to buy listed stocks can also purchase stocks through the stock market.
The unique thing about a stock market is that we the public do not physically go to the stock market to make trades. We use intermediaries known as stockbrokers. Stockbrokers are people who have been trained and licensed to buy and sell stocks on behalf of the public that seeks to invest.
By investing in stocks, we can open ourselves up to the possibility of earning financial rewards in two ways:
a. Capital gains: In other words, I can buy Apple stock today for $144.50 per stock. If in December of this year the price of this stock has increased to $200, the difference between the purchase price and the end of year price represents the capital gain.
b. Dividends: Every year, companies assess their financial performance in the previous year and decide whether or not to pay dividends to existing shareholders. Once you buy stock in a company on the stock market, you are now a shareholder! You have the right to enjoy when the company does well financially. A company will decide whether to pay dividends to existing shareholders based in its past financial performance. Apple could decide to pay out dividends of $5 per stock. This means if you have 10 stocks in Apple, then you would receive a dividend check of about $50 (10 stocks times the dividend payout per stock of $5).
These days there are a variety of websites that assist the public to buy and sell stocks. Many of these sites also offer classes and quality information on stocks. It is highly encouraged that one utilize these resources to gain quality knowledge about the financial markets in general and the stock market in particular.
Who invests in stocks? The public does as well as institutional investors such as pension funds and insurance companies. All of these individuals and entities want their money to work for them. They are looking for income from capital gains and dividend payouts on their stock investments. Clearly, this opportunity is open to you as well!
Next week, we shall continue to share pertinent information about investing in the stock market.
Please feel free to share with me your questions and experiences on investing in stocks. I will do my best to respond, and, in some cases, I will write on some of these questions.
Your questions and comments can be sent to localtalknews@gmail.com.
