Imagine you go to a grocery store. You buy a box of bananas for $1 each. The next day, you open up a small stand and sell each of your bananas for $2 each. At the end of the day you’ll find that you have doubled the original amount you spent. Perhaps some of the customers might realize that your prices are higher, and they’ll go elsewhere. The stock market works in a similar way, although stocks are not physical things. Instead, a stock represents a percentage of the company. For example, if a company has a hundred stocks for sale and you buy just one, that would mean that you own one percent of that company. People buy stocks, or invest in a small parts of a company, in hopes of making money on them. When you buy stock, you become a shareholder, which means you now own a "part" of the company. If the company's profits go up, you "share" in those profits. If the company's profits fall, so does the price of your stock. If you sold your stock on a day when the price of that stock falls below the price you paid for it, you would lose money.
The great thing about the stock market is that you can buy stocks from many companies and sell them when you wish. The stock market works in the same way as a flea market. People go to the flea market to check out all of its vendors. The stock market serves as a marketplace for different companies. People can buy and sell stock from many different companies in the stock market. Each company sells its stock at different prices. Stockholders look at the stock market until they find the best prices. The stock market also gives stockholders the freedom to sell stock after it makes a profit. For instance, if someone buys a stock for one dollar and the stock value rises to ten dollars, then that person can sell it to another person for a nine dollar profit. In other words, the stockholder who bought one stock for one dollar made an extra nine dollars by selling it. People who trade in the stock market use online tools and programs to help them monitor how the market in general is moving, as well as how individual companies are doing. Unlike the example, where a customer might just buy one banana, stock traders buy large volumes of stocks.
Wednesday September 16, 2020
The following questions can be found in an attached Google Document in Google Classroom.