When you own stock, you own a piece of the company. This means you own a share of the company’s profits and assets. It also means you have a special relationship with the company that other people don’t have. You even have a say in how it’s run because you can vote, attend shareholder meetings, and more.
When you own stock, you can potentially make money! There are two ways you can make money with a stock:
First, the value of your ownership stake can go up. Let’s say you buy 1 share of your favorite company’s stock for $50. The company grows and becomes more valuable. That 1 share is now worth $60, and you can sell it to make a $10 profit. Or, you could hold onto it, thinking it might go up even higher. (Of course, it could go down. If you sell for $40, you will lose $10.)
Second, with some stocks, you can earn dividends too. Dividends are company profits that some companies distribute to their shareholders. (Others pour it all back into the business.) This is cold hard cash you get just for being a shareholder! For example, in May 2017, Apple paid out $0.63 per share in cash to its shareholders.
You can make a lot more money owning stock than putting your money in a savings account. Although stocks go up and down consistently, which means there’s more risk investing in stocks compared to putting your money in a savings account, the reward can be much higher. The stock market has gone up an average of 9.8% a year over the last 40 years–way more than the 1% you might earn in a savings account these days.
What is stock and why should you own stock?
When you own stock, you own a small piece of a company. Stock comes in units that are called shares. A person who owns shares of stock is called a stockholder or a shareholder. Companies are typically divided into millions, tens of millions, or even billions of shares. For example, Facebook (FB) is divided up into 2.35 billion shares.
If you want to figure out how much of a company you own, divide the number of shares you own by the total number of shares. If you own stock in the amount of 23.5 million shares, you’d own 1% of Facebook. Mark Zuckerberg owns 471 million shares, which is about 20% of the company. Not too shabby.
In the old days, a stock came in beautiful paper certificates like this:
Companies have been phasing out physical certificates because they’re a pain to deal with. They can get lost or damaged, and you have to mail in the certificate if you want to sell your stock. Most brokerages won’t even handle them anymore, or they’ll charge a lot to do it. So nowadays, it’s pretty much all electronic, or in the case of Stockpile, you can own a gift card of stock!
Historically, the stock market has returned an average of 9.8% a year. That’s significantly higher than most other investments. Of course, stocks rise and fall, so you’ll make money or lose money depending on the day. But it’s a smart investment if you’re in it for the long haul, ready to weather the ups and downs.
The sooner you start investing, the more likely you are to build some serious wealth. For example, let’s say at age 12, you start investing your babysitting money of $1,000 a year in the stock market. You do this for 10 years until you graduate from college at age 22. You never put additional funds in the stock market after that. Assuming your stocks go up an average of 9.8% per year, that investment will be worth more than a million dollars by the time you turn 65. $1,107,393, to be exact.
(If you had put that same money in a mattress, guess how much you’d have at age 65? Yep, $10,000. Assuming no one else found it first.)
The sooner you start investing, the better your chances are of turning a profit and making some gains. Get started with Stockpile today.