subject: What Are Stocks? [print this page] What Are Stocks? What Are Stocks?
For those who own a small business and are looking for options to expand it, the owners can gain money without the need to take out a bank loan. They offer an option to sell parts of their company so that they can use the money to grown and earn more; making the profits rise.
The problem with opting for the stock market is that the owner loses part of the company but can make the decision of how much of the company to offer up as shares to the public. Most companies will keep at least 50 percent, so that they can make all the decisions, and will never usually drop below owning 60 percent of the company.
The stock market can offer the chance for the company to expand without having to pay any extra fees, apart from to the underwriter. The owner can keep the profit that they earn and then the rest is distributed among the other share holders. The owner also gets the upfront money for the shares sold, so they are instantly able to start expanding the business and open more stores.
Of course, there is the option of a bank loan for upfront payment. The problem with opting for a bank loan is that there are a number of interest rates that cause the total cost of the loan to increase, meaning that you are paying a lot more off than you actually want to. You are also not guaranteed to get all the money to expand your business that you need and if you have a poor credit rating due to previous bad decisions, it can be difficult to get the amount that you need for the expansion. By opting for stocks, you know exactly how much you are going to get once you speak to an underwriter about your stock options.
For the public, stocks are a share in the company that you have bought the stocks for, which means you get a set percentage of the money that the company makes. It is a great long-term investment option if you are wanting to save up for retirement or for your baby's college tuition fees. Stocks usually take at least five years to show some payback, since it all depends on the growth of the company, so they are not so great for short-term plans, like buying a house or a car.
There are a few downsides with opting for the stock market, both on a business side and a public side. For the owner of a business, once you sell shares into your company, you can no longer just close down if you find that the business is failing; you have a lot of other people to think about. If you are one of those who has a stock in a failing business, you could see yourself having to pay a lot more money to get out of the stock before you find that you lose everything.
There are a number of things to think about before looking at the stock market for an investment since there is no guarantee of a return of money. It is no good for those who are constantly worried about what the stocks are doing and check them every hour of the day to see if they have recovered. Sometimes, it can take businesses months to get out of a slump and the stock market will constantly fluctuate as some companies do better than others.
While your money is in a stock, you are not losing anything. You only lose money when you sell the stock at a lower price than what you paid for it. While you do need to keep an eye on how your stocks are doing, and you should have more than one to see the investment work efficiently, you should not jump out of the boat the minute that the stocks start to go down. Keep the money in there and see how it does over a longer time period. The only time that you should be worried is if the stocks continually fall and a company is going into bankruptcy.
If you are looking for a way to expand your company but are only just getting over the bank loan payments for starting your business, then you should consider stocks to make the money. You will get the upfront payment, without any interest fees. However, it can involve a lot of work and decisions as you find an underwriter to handle the paperwork and then decide how much of your company you are willing to put into the stock market. You will need to look at how much the company is worth and how much you need to expand the business.
If you are contemplating buying shares into a company, then you should look at all the companies and consider everything fully before throwing your money into the cheapest stock or the one that looks to be doing the best now.
