Stocking Up (or Down?)
Learn how to manipulate the stock market in our stock market game. Know why this man is using a bear and a bull for puppets? Check out Stock Terms to find out!
For some people, buying stocks is a great way to make money. For others, it's a great way to go broke! Our question and answer session shows you a few of the stock market's ups and downs.
Q: What are stocks?
A: Stocks are certificates, kind of like store receipts, that show that you own part of a company. Companies sell millions of shares (individual units) of their stocks so the companies have money to create new products or provide services.
Q: How does buying stock make money for me?
A: There are two ways you can make money from stocks. For one, if you own shares of a company, and that company does well, other people may want to buy that stock for more money than you paid. Say you buy 10 shares of McBurger Queen stock for $20 each (a total of $200). And say McBurger Queen comes out with a new burger that everyone loves. As a result, the stock's value goes up to $25 a share. If you sold those shares, you'd make $5 per share, or $50 dollars.
The other way you can make money from a stock is if your company pays dividends—a small part of the company's profits—to its shareholders.
Q: So why doesn't everyone buy stocks?
A: Owning stocks can be risky. No one knows for sure if a company is going to be successful or not. Let's go back to McBurger Queen: Say its new burger is gross—everyone hates it. Each share's value could drop to $15 and you'd lose $5 per share, or $50 dollars. A stock's value can drop to almost nothing. The company could even go out of business! You would lose everything!
Q: Which stocks should I buy?
A: Think about products, stores, and restaurants that you and other people know and love. Look at the companies' Web sites and see if you like their plans for the future. And, most importantly, talk it over with your parents. Until you're 18, you can't buy shares of stock without them.
Now try your luck by playing our stock market game (PDF). Don't worry—since there's no real money involved, you can't lose!