Whenever we hear the word stock trading, the first image that comes to our mind would be yelling, crowd, bustle.
Now we are in the digital age, but ever wondered what people used to do when online trading was non-existent? They used to scream their way to get their buyers and sellers. Today, digital media has eliminated most of the troubles faced by traders. Stock market platforms have become quiet. Trades are mostly implemented through the internet.
Besides, individual investors have also evolved. More and more are investing than trading. Wait, are investing and trading different? Yes. Investing is something that is done for a long period of time while trading is done for a quick profit. Let’s see how to use both of them together as a combo.
Every time you buy or sell stocks, it is called trading. So the term “trading” can be used to specify both “investing” and “trading”. Why trade in stocks? Because stocks have the capability to increase one’s financial status. This is specifically true for long term plans like retirement.
The society has mixed feelings about stocks. Few people like it, few people dislike it. Some of them even make a living out of stock trading. Some people also theorize that stocks are too risky. It’s not completely false. Both of the sides are true. The financial crisis of 2008 shows the ugly side of it.
What is Stock?
So what exactly is a stock? Let’s begin with the basics.
A stock or asset is a small share of a total company. A person who owns a share of the firm actually has equal ownership in that firm.
This ownership can’t be compared with what Adani might enjoy on Adani Group, but the stockholders have a “claim”. The claim is only limited to the company’s profit.
For example, let’s say there is a firm which has around 100 shares in the market. You own 1 share of that company. The company makes $1500 in net profit. As a shareholder, your claim is $15. (earnings divided by total shares)
You would not be expected to suggest on how to run the business, but the firm is obliged to share $15 with you. Do note that the firm is not bound which means it is within the company’s rights to retain the profits instead of giving it to the shareholders. The profits are held to boost the business.