How do Stock Prices Change?
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When you buy stocks, you have two ways to make money. You can make money through dividends that the company pays for each share you own. For example, they might pay 25 cents per share each quarter. Dividends are not guaranteed, though. The other way to make money is through capital gains. This means that you have bought the stock at one price and then sell it at a higher price. The difference between the price paid and the price sold is your capital gains. When someone buys shares of stock, they do so in hopes of profiting through capital gains. High dividend paying stocks are often sought after by retirees who are looking for a stable source of income. 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. An increase in supply with the same demand will decrease the price. An increase in demand with the same supply increases the price. The price changes depending on whether and how supply and demand change. 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. If you understand how this works, you can better understand how to make money with stocks. You want to buy stocks that you think a lot of people will be buying in the future so that the price goes up. About the Author:
Do you want to know how do stocks work? Find out if you should choose the stock market or bond market to invest in.
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