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What Are Stocks? A Basic Intro

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You must’ve been hearing about stocks for a while now. Some say stocks are the best assets to purchase while others are indifferent. What are stocks and why the hype? Read this article to find out.

What Are Stocks?

Stocks are simply the ownership of a company, in simple terms. When you look at a company, ask who the owners are. Let’s say that A, B, and C are the owners. The next question is, who owns the company more?

You can learn about a company's owners and their ownership proportion by looking at the company's stock allocation. The stocks someone owns are the shares of a company’s equity held by the person.

Why Do Companies Issue Stocks?

If stocks mean the ownership of a company, why do companies issue stocks? In other words, why do companies want more owners? Companies issue stocks for some simple reasons:

  • To raise money for growth and expansion: Purchased stocks are extra capital for the company. It is the same as adding more funds to your business for a new project.
  • An alternative to borrowing: Instead of borrowing to fund projects, companies issue stocks so that they do not need to pay back their loans plus interest.
  • To get more public interest: When you own the shares of a company, you want them to perform well, right? This means that you are more likely to recommend their products or services.

Justified reasons, right?

Three Reasons to Purchase Stocks?

Some reasons to purchase stocks are as follows:

1. Price Increment

When you buy the shares of a company today, the price you paid for it does not remain the same. It changes over time. This means that you can make extra profits if you decide to sell the shares in the future.

2. Dividend Payment

Yes, stocks may guarantee you dividend payments. When you are the owner of a business, you withdraw some profits from the business, right? When companies withdraw a part of their earnings and pay their shareholders, the withdrawal is called a dividend.

According to the company you invest in, you may or may not get a large chunk of their earnings returned to you as dividends.

3. Company Ownership

Of course, always remember that the underlying value of stocks is that when you purchase the stocks of a company, you become a part owner of the company. If you have a favorite company today, search for and purchase their shares.

What Are the Risks in Equity Investment?

1. Volatility

The price of a stock can appreciate or depreciate. This means that you cannot be 100% sure it will go your way. This is quite risky, especially for new investors.

2. Economic Downturns

Things in the country may not stay the same. Some unforeseen occurrences can make the economy crash. A crashed economy affects a lot of companies.

3. Liquidity

When you buy the shares of a not-so-common company, you may find it difficult to sell it and get your money back.

Conclusion

Stocks are right for you, and we know that you know. Thankfully, the Assessworth platform has all you need to start your equity investment right away. Sign up and enjoy a risk-free investment journey.

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