Every new trader or investor starts by asking “how do I make money in the stock market today” or something along those lines. It is a good question but it is the wrong question. There are lots of things to know before you can make money investing. The first thing you need to know is what is a stock.
A stock is a portion of a company. How much a portion, you ask. That depends on the stock. Wait that does not make sense you say, let me explain it.
Companies do not have a set number of shares available. Each company decides how many shares it has available. Companies are able to issue more shares or buy back outstanding shares. You may have heard about the latter in the news lately. If you want to know how many shares are available you can find the number at the bottom of the balance sheet. I will talk about a balance sheet in a later post.
So what are you buying when you purchase a stock? You are buying the rights to the future earnings, dividends, and assets of the company. I guess the simplest way to answer the question what makes a stock go up is that investors believe that the future earnings, dividends, and or assets will increase over time.
Learn more by reading Get Rich Carefully by Jim Cramer
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