Stock Markets Exposed
How do shares in the stock market work?
Ok so i understand the whole process of buying shares on the stock market, what i want to know is how do they determine how much you get back. Is each share worth a certain amount?
Public Comments
- A share represents a percentage of a company, depending on how many shares there are and how much a company makes in profits will affect the market value. Stocks are auctioned off on the open market. The only thing that truly determines the value of a share of a stock is what someone is willing to pay for it. For example Today you could have bid $24 per share for X amount of shares and would have been able to buy X amount of shares for $24 each. However if you had bid $22 per share you would not have been able to buy any because there were no sellers that were willing to sell their shares at that price today. The way it works is you tell a middle man (broker) how much the maximum you will pay to buy a share or how little you would be willing to accept to sell a share. Most less experienced investors simply place a market order to buy or sell, this gives the broker a free license to purchase/ sell on your behalf at any price, not a price that you have predetermined. Choosing your own price is referred to as a Limit Order and is the safer and smarter option. Please note that this is a simplified account intended to illustrate the basic principles behind a stock's price. Other factors such as dividend yields can affect the price that a person is willing to pay/ accept for his/her shares. I hope that this answer adequately answers your question.
- You are buying a part of a company with each share. As time goes by people guess the worth of the shares, so hopefully over the years they go up, but can go down. Sellers think the Stock is going down but buyers think it is going up . Many factors determine stock price but the most important is earnings and company's avoiding bad news. I would put most of my money in mutual funds and diversify by having cash, bonds, large and small domestic and foreign funds and REIT's. DIVERSIFICATION is crucial and controlling your cost, try index funds- latter some active funds and stocks..
- Hi, i recommand you a good and basic tutorial for investing. it covers all Issues related to your Investing and everything around it. http://www.investingtutorial.info/ wish it will help you. Good Luck , Best Wishes!
- Supply and Demand.
