Understanding Stocks

Investing in stocks can be fun and exciting, but it can also confuse you if you are not familiar with them.

In case you are not sure what stocks are, they are paper assets that companies issue to help them raise money. When you purchase stocks, you become part owner of the company. When companies decide to sell the stock they make money. Before investing in stocks, consider these facts:

Before the company can sell stocks, they must be registered and have a ticker symbol. This is an identification tag for a stock. By this symbol, people will know the company and stock.

When investing in stocks, keep in mind that blue chip stocks are regarded as the best and safest. This is because the company that hold the stock, is financially well off and stable. Blue chip stocks are guaranteed to pay dividends.

When investing in stocks, you will hear the term dividend quite often. This is a term that refers to the portion of what the company makes and gives to you based on the value of your stock. For example, if you purchase stock that is worth $25 a share, for every share of stock you have, you may get $.25 a year, unless they pay quarterly which equals ¼ of $.25.

Besides blue chip stocks, there are also penny stocks. A penny stock is a stock that trades below $5 a share. These stocks tend to be high risk and could fluctuate in price. Companies that offer penny stock may be close to bankruptcy, so it is good to stay away from them.

If you choose to invest in stocks, be an intelligent investor. You want to pick the best stocks not just any type. As I stated above, blue chips are the best to get involved with. Keep in mind that when you buy stocks, you are not just buying a certificate of stock; you are taking on a share of ownership of the company.

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