Billions of stocks are traded every day, maybe even trillions but throughout the stock market traders are making infinite decisions on which to, hold, sell, or buy. People may ask “Well what are stocks?” It is basically ownership in a company, in which you buy a share on the stock market and that share is worth a dollar amount. If that share you buy, raises in value meaning that the dollar amount of the stock is now more than what you paid for it, which this means you gained. But if it is opposite that basically means you lost money. The whole point of trading is investing in companies that you hope their stock rises because if it does that means you can sell your share for more money then what you paid for it resulting in you making a profit.
As stated earlier, when the stock price is more than what you paid for it that means you have a gain. But there are actually different types, one is an unrealized gain which means you still have the stock in your trading account and you have not sold it yet. With an unrealized gain, you have gain but you just have not sold it yet so you don’t have those profits. The other gain is realized which means that you had the gain but you sold it. This means that you have the profits already of the stock. Basically the difference is that one you still have it in your trading account and the other you already sold it.
But with gains come losses, and there are also different types of losses. The first is an unrealized loss, meaning that you have a loss on that particular stock but you have not sold it yet. The other is realized loss, meaning you sold the stock and accepted the loss. Losses and gains are the same in the aspect that they have the same types, realized and unrealized.
Throughout the market, there are also types of stocks: common and preferred. Common is what everyone usually trades; it is the stocks that are usually traded on the market. Also, with being a common stockholder for the company that you own that stock you get to vote in the company because you are a shareholder. But with preferred you do not get a vote.
But preferred stocks are mostly compared to bonds because they usually pay investors a fixed dividend. Preferred shareholders also get preferential treatment, dividends paid to preferred shareholders before common shareholders, including in the case of bankruptcy or liquidation.
Preferred stock prices are less volatile than common stock prices, which means shares are less prone to losing value, but they’re also less prone to gaining value. This type of stock is more long term meaning that you have to hold the stock for a while before it becomes valuable which may not be the case for some investors.
Everyday people make thousands of trades, causing the stock market to be up or down. If people are scared and think something bad is going to happen to a certain company or sector they will bet against that stock or industry. Also for those who are not really into the market or finance, a sector is an industry, ex. technology, manufacturing, energy, etc. These sectors or industries make up the market because in these industries there are hundreds of companies that sell their stock. Judgment and media, this is because news comes out that the company is being invested in mistreating its workers (made up case) people will sell causing the stock to fall.
But on the opposite case if people believe the stock will go up or good news comes out that the company is buying another firm people will buy more causing the stock price to drive up. People buy and sell on personal judgment or they find out bad news about the company or good news. People make these complex decisions that end up shifting the market completely though it may seem easy to buy or sell it is an extremely difficult decision to make once you are in that position. In a day you could lose all your money in an investment or you could double it.
That is what is amazing about the market that you could make a tremendous amount of money or you could lose a tremendous amount. But that is that risk you take investing, but once you lose you definitely have a chance to make your investment back. That is also what is amazing about the stock market. A person could have big losses one day but the next day it is a new start the market could move in any way.
Hopefully, this article helps those who are not really into the market understand what stocks are and the types of stocks that are out there for people to invest in. Moreover, hopefully, this article helps those who are scared to take the risk of investing.
Just remember, you miss 100% of the shots you don’t take.