What are Stocks And How Do They Work ?
What are Stocks of a Company ?
Do you know what is stocks in simple words? It is just person's shares in the ownership of the company. When you buy a stock, you are essentially buying a small piece of that company. This means that you are entitled to a share of the company’s profits and assets.
Shares are traded on the stock exchange which are places where buyers and sellers can come together to buy and sell.
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Why is Stock Market Important?
There are several reasons why people invest in stocks. Here are a few of the most common reasons:
- Potential for Capital Gains
- Many companies pay dividends to their shareholders.
- Participation in the company’s growth.
- It can be a good way to diversify your investment portfolio management.
How Does Stocks Work?
Let us understand the process how stock market works step by step?
- Companies issue stocks to raise money.
- Stock exchange are marketplaces where buyers and sellers can come together for share trading
- If the stock price goes up, investors can sell their shares for a profit.
- Some companies pay dividends to their shareholders.
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Impact of Stock Market on Economic Growth
Stocks are a popular investment for a variety of reasons. They offer income, diversification, liquidity, and growth potential. Which brings a positive impact on the economy.
| Impact On Companies | Impact On Investors |
| Raise money to grow their businesses | Potential for capital gains and dividends |
| Improve their credit ratings | Diversification of investment portfolios |
| Can dilute the ownership of existing shareholders | Can provide a source of retirement income for individuals. |
Stock in Business Example:
| Company | Stock Symbol |
| Reliance Industries | RELIANCE |
| Tata Consultancy Services | TCS |
| Infosys | INFY |
Also Read: Risk Management Definition and Examples