Stocks represent ownership in a company, divided into small units called shares or equity. When a company wants to raise money to grow, it can offer shares to the public, usually through an initial public offering (IPO, the first time its shares are sold to investors). Buying a share makes you a shareholder: a part-owner with a proportional claim on the company's assets and profits.
After the IPO, shares are mostly traded between investors rather than with the company itself. So when you buy a share, you're usually buying it from another investor who wants to sell.
Where are stocks bought and sold?
Stocks are bought and sold on a stock exchange, a regulated marketplace where buyers and sellers trade shares. The "stock market" is the broader term for all these exchanges and the trading that happens on them. Well-known examples include the New York Stock Exchange, Nasdaq, and Germany's Deutsche Börse.
The price of a share at any moment is set by supply and demand, meaning the price at which buyers and sellers agree to trade. Most people access exchanges through a broker or investment platform. On Mintos, for example, orders are executed via Tradegate Exchange, which offers extended trading hours. Here's [How to invest in stocks] step by step.
Why do stock prices go up and down?
Stock prices go up and down because the balance between buyers and sellers is constantly changing. When more investors want to buy a stock than sell it, the price rises. When more want to sell, the price falls.
Several things drive that demand:
- Company performance: earnings, new products, and management decisions.
- Investor expectations: what people believe the company will achieve in the future.
- Wider economic news: interest rates, inflation, or political events.
For example, if a company reports higher profits than expected, more investors may want to own it, pushing the price up. In the short term, prices can also move on sentiment alone, even when nothing has changed in the business itself.
How do you make money from stocks?
There are two main ways to make money from stocks:
- Capital gains: if you sell a share for more than you paid, the difference is your profit, known as a capital gain. If you sell for less, you make a capital loss.
- Dividends: some companies share part of their profits with shareholders as cash payments called dividends. Not every company pays them, and the amount is always the company's decision. Learn more about [How dividends work].
Neither is guaranteed. Some companies focus on growing their share price, while others are known for steady dividend payments. You can read more about [Different types of stocks].
What's the difference between stocks and shares?
The difference between stocks and shares is mostly one of wording - the two are often used interchangeably. "Stock" is the general term for owning part of a company, while shares are the individual units of that stock you hold. So if you own shares in a company, you own some of its stock.
Are stocks risky?
Yes, stocks carry risk. Share prices can fall as well as rise, and you can lose some or all of the money you invest. A single stock depends entirely on one company, so poor results, bad decisions, or insolvency can reduce its value sharply.
That's why many investors spread their money across several companies, sectors, and regions, and think in terms of years rather than days. Only invest money you can afford to leave invested, and remember that past performance doesn't predict future results.
This article is for educational purposes only and is not investment advice.