What is a Stock?
The most straightforward answer is this: A stock is a portion of a business that you can own by paying someone else for that piece. It is sometimes refered to as shares.
Who Owns Stocks?
The wealthiest people in the world are all owners of stocks. From Warren Buffett, Jeff Bezos, Oprah Winfrey, to Rihanna. Your neighbors probably own stocks too, check with your grandparents while at it.
I buy stocks and I will share a personal story in the end about the kind of returns that are possible later in this post.
How Stocks Become Available?
when entrepreneurs and business owners decide that they want to raise more money to to grow their company, or just to cash out a portion of their ownership they find a stockbroker. The stockbroker assist in listing their company on a market place for members of the public to buy. This process is called Initial Public Offering (IPO).
How to Buy Stocks?
Once a company’s stock is listed on the stock exchange, buyers from around the world can choose to buy ownership in that listed company.
In order to make the purchase, you need to have a brokerage/equity account. This account requires you to submit documents similar to when you are opening a savings account. Some countries may require additional documents for tax purposes.
This is the beauty of stocks. You may live in Africa but you love Apple products. You can therefore buy the stock of Apple through a local brokerage in your country or by setting up a brokerage account in the United States.
Once you have made the purchase, you are now a part-owner of Apple. You can vote on the direction of certain things in the company. Usually, voting is done at an annual shareholders’ meeting. The perks of attending these are that you get to see and if bold enough, meet some of the biggest business leaders who are also shareholders.
How do you make Money with Stocks?
As a shareholder, you can make money in several ways. Here are the two main ways:
Capital gains- this is when the price of your stocks rises and therefore the value of your portfolio increases.
Dividends- This is the portion of profits that the management team decides to send to you. It can go straight to your brokerage account or you can get a check/cheque. You may reinvest it or if it’s large enough use it to take care of some expenses or treat yourself.
My Story
I consider stocks as a good investment for the long term. Here’s the story about my stocks experience.
I have been buying since I was in high school. I have bought stocks where I have lost money on. Let me say this, you have to have the guts to see your portfolio value drop 10%, 20%, 50%, and still hold on because you are in it for the long haul.
With that being said, no amount of preparation will prepare you for the sinking feeling when you see those actual negative numbers. No amount of preparation can prepare you for when the winners come either.
I bought a company on the stock exchange in 2013 I believe. I held those shares for around 3 years. At the time I decided to sell, I made 26X my initial investment. Yes, 26 times or 2,695.70% return.
If I had those stocks today, my return would have been 123X or 12,373.12%. And yet, my story is small when compared to other investors.
As I write this, I am holding stocks in a company that has lost almost 40% of its value in less than 2 years. I do not intend on selling now because the fundamentals of the company are still strong. There are times when you should sell a stock though. I’ll have to cover that in a later post.
Thank you for reading. If you found this post interesting then give it a like and share. Thank you and see you next week. God’s will.