Why do people buy stocks?
People invest in stocks to generate returns. You can generate revenue from owning shares (units of stock) in two ways:
- Companies can decide to return money to their shareholders via dividends. This is cash paid to investors for each share that they own. Not all companies are dividend-paying companies.
- The value of the shares in your portfolio could increase. When investors sell their shares, they pocket the difference between the price at which the shares were bought versus when they were sold.
Nonetheless, people can lose money when investing in shares, particularly if the price at which they sell the stock is lower to the price at which they bought it, or if the cumulative costs associated with purchasing, owning, and selling these shares are higher than the difference between the initial price of purchase and the price at which the shares were sold for.
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