Have you ever wondered about what are those numbers in pink papers, which people follow so religiously? Do words like shares, stocks, scrips, ticker and earnings seem Greek and Latin to you? Do you believe that only speculators and gamblers invest in shares of companies and it is difficult to make money out of it by ordinary investors. Well you are not alone if you hold this view as a large number of people are still wary of investing in shares and stocks. Let us start with the very basic to give you an idea about making money out of capital market.

Companies are listed on stock exchanges. It means that there shares or stocks are available for trading. What do these stocks mean? These stocks are the ownership instruments of a company. Thus a company having a share capital of say 1 million dollar with 10 investors holding equal number of shares means that each person is a 10% owner of the company. Similarly if you hold a small fraction of a company’s stocks, you are a proud owner of that company to the extent of your holding. So far so good.

If you are an owner of a company by way of holdings its stocks, however small it may be, what do you get in return? Well, you may be rewarded by dividend, which means that if company is making profits, you get a part of that. You may also be rewarded by way of bonus shares. These shares are additional ownerships in the company without you having to spend anything for that. Why do companies do that? It is because you have held stocks of the company for a long time. And to top it all, you may be rewarded by appreciation in the value of your stocks if the company is performing well. Let us see how it works.

Those holding stocks in the company are the risk takers. Risk here is the possibility of the failure of its ventures or business models. In such an event, stock holders are the ones who get repaid in the last for their investments made. Only once creditors, suppliers and others to whom the company owes money are paid in full, the stock holders are entitled to receive anything. For bearing such risks, they are also entitled to reap the maximum benefits in case the company does well. And if the company is performing well, it is reflected in its stock prices which you see in your computer screen as a ticker or in news papers, which people see first thing in the morning. Thus you may have bought shares at a price but it may go up and to that extent go down also depending upon how it is performing and what are its potential.

Owning stocks in a company are a great way to build your assets profile over a period of time. Always diversify your risk in various segments and sectors and try to do a bit of research before making investments. You may end up with a stock pile of money by investing in stocks.