London, England, 4th Nov 2021, How do stocks work? This is a topic that has been generally misunderstood by many. FinancialCentre Broker Nathan Banks said that when it comes to stocks, they are just like money in your bank account that you can trade and invest in for better returns than normal savings accounts or CDs.
Here is how stocks work
Imagine your local coffee shop. They go through cycles of selling more cups of coffee in the morning and during lunch. During times when there is a lull in sales, owners buy more coffee ahead of time in order to keep up with demand. That excess inventory is what is known as a Coffee Stock or the Starbucks of the world just have too much money in inventory which no one wants to purchase from them so they have to sell off the excess.
Buyers of coffee stocks hope that one day people will want to buy more than what is available and they will be able to sell their inventory at a higher price than the lower-priced items they already have.
Now imagine someone who was not really into coffee tried to invest in this coffee shop based on the activity of its daily sales. They would buy a share of the coffee shop if they thought it might take off and gain in value over time as more people want to drink the caffeinated beverage. The only difference between that store’s stock and a share from many other companies is that you can purchase real estate or material items with shares from other companies, but not coffee stocks.
What are stocks then?
Stocks are just pieces of a company that you can purchase through different investment brokers. They are not really physical items, but rather just a share of the parts of companies. This is why it is only possible to buy fractions of them and not complete shares like in the coffee shop analogy.
How do stocks work and what is the stock market?
A stock market is a place where people can go to buy and sell different companies’ stocks. You can purchase them from an online broker or through someone you know that has purchased some. There are many more options than just buying your local coffee shop’s stock, but they all follow the same principles.
Different stocks do better during different times of the day, week or month. For example, a broker can tell you when is a good time to purchase Apple’s stock because it has been going up in value lately and when it might be a bad idea to buy Sprint’s stock because in their quarterly report they stated that they lost a lot of money and expect to keep doing that for the next few quarters.
The price of stocks is not set by any one individual, but rather it is what people agree they are worth at a given point in time. Mr Banks has helped us pick 2 stocks that have been on the rise recently. Both these stocks have been gaining value as the companies continue to do well and expand their business. In his opinion buying stocks now will ensure a higher return on investment rather than waiting for these stock prices to go up even further.
Microsoft is a software and hardware company that was founded in 1975. They are known for operating systems such as Windows, security software such as Windows Defender and Xbox consoles. There have been many acquisitions made by the company over the years which include video conferencing (Skype), online advertising (Bing Ads), PC gaming (Rare Ltd.) and fitness tracking (Microsoft Health).
Recently Microsoft announced they would be buying LinkedIn which is a social networking site for professionals. The acquisition was made in order to better integrate LinkedIn with Microsoft products such as Outlook and Skype. This buyout has already been completed and the CEO of Microsoft stated on their latest earnings call that it is an important step forward for Microsoft and that LinkedIn will continue to operate independently in order to maintain its brand and expand in the future. This buyout is a positive sign for anyone who already is invested in Microsoft or looking to invest because it means they are trying their hardest to stay ahead of the curve when it comes to technology.
Nike is a brand that specializes in footwear and sports apparel. They are the world’s largest company by revenue as of 2017 with $34.3 billion, but they actually had more than double that number ($85 billion) until last year when they decided to buy back shares of their own stock. The reasoning behind this buyback was to increase the value of their stock, which had been decreasing in the previous years.
Nike is known for being one of the most innovative companies when it comes to new technologies that they incorporate into shoes and sports gear. They are always trying to push shoe wear forward with updates such as shoelaces made from Kevlar or self-tightening laces. Nike actually just recently released their earnings report that shows strong growth for Q4. They are expecting to grow even more in the coming year because of the higher demand for sports apparel and new kinds of footwear they are releasing such as self-tightening shoes with shoelaces made from kevlar.
Disclaimer: Our content is intended to be used for informational purposes only. It is very important to do your own research before making any investment based on your own personal circumstances. You should take independent financial advice from a professional in connection with, or independently research and verify, any information that you find on this article and wish to rely upon, whether for the purpose of making an investment decision or otherwise.
Disclaimer: The views, suggestions, and opinions expressed here are the sole responsibility of the experts. No Glean News journalist was involved in the writing and production of this article.