How exactly does investing work?
I saw this commercial where it said that this man who invested in a company owned .000000008 of that company, or something like that. If he really owns that much of a company he should get money when the company gets money. Is this corect?
What about selling your stock of the company you invested, how does that work?
Simple answers:
He will get a percentage of the profits based on his ownership. This is called a dividend. For example, Ford Motor Company gave a dividend of 40¢ per share. So, if you have 1000 shares, you would get a check for $400. You can also choose to reinvest your dividends to buy more stock automatically rather than getting a check. Note that some companies do not pay dividends at all. The theory is that they will use the profits to invest in and grow the business. Also note that the dividend payout in set by management and they usually don’t pay all the profits out, so your dividend is usually not profits/ number of shares.
Selling your share is simpler. You sell it to someone and you get the proceeds (minus stockbroker commission). If the stock is selling for more than you paid for it, you profit. If less, you lose money.
You buy something, hoping that it will increase in value, so you can sell it later. Alternatively, you give your money to someone who tries to buy things with it that he hopes will go up in value so he can sell it later.
Sure. A corporation is owned by its investors (the people who own its stock.) Shares of the biggest corporations are traded on public markets like the NYSE or NASDAQ where pretty much anyone can buy some. When a company makes a profit, it decides how to spend it. Some companies choose to spend all the money paying expenses and buying new stuff, others decide to give some or all of the money to shareholders (a dividend.) To use a real-world example, IBM will pay a dividend to its shareholders of $0.16 per share in June. Since IBM currently has about 1.73 billion shares outstanding, that means they’re going to give their shareholders a total of $272,000,000. If you owned one share of IBM, you own one 1.73 billionth of the company and would get a check for sixteen cents in June. Many people choose to use dividends to purchase additional shares of the same stock, but you don’t have to.
If you no longer want your shares, you can sell them as long as someone if there to buy them. Most people buy and sell stock through a broker whose firm has a seat on the exchange in question. So you would call your broker, tell him to sell, and he would put in the order. Brokers charge a small fee for this service. If you made a profit on the sale (you sold it for more than you bought it for) then you will have to pay capital gains taxes on it.