Why People Buy Shares

People have been buying shares and investing in the stock market since 1792, when the New York Stock Exchange was first established. The rich history of the stock market is loaded with highs and lows, and, through it all, investors have continued to regard it as a primary investment destination. The endurance of the stock market can easily be attributed to the many benefits afforded to those who continue to buy shares of companies.

Making Money

The primary reason that people buy shares of companies is to make money. The idea is to buy low and sell high. For instance, if you buy 100 shares of Company B stock valued at $25 each, you will have made an initial investment totaling $2,500. If in the next few months those shares increase to $50 per share, you can sell them for a total of $5,000, thus doubling your investment. Of course, the amount of money you can make depends on the performance of the stocks.

Taking Ownership

When you buy shares of a company, you are taking ownership, a perk that allows you to share in the successes and failures of the company. Your ownership is equivalent to the percentage of stocks you own. For instance, if the 100 shares of Company B that you own make up only .01 percent of the company’s total number of shares, then that is how much of Company B you actually own. As partial owners in the company, shareholders are kept informed of company news and are often invited to attend shareholder meetings.

Portfolio Diversity

The primary goal of investing is to make money, and by creating a diverse investment portfolio, you will reduce your chances of losing money. The stock market offers plenty of companies to choose from, allowing you to spread your money around and invest in multiple companies. If your shares of Company B happen to decrease in value, the loss might be offset if shares of Company C are on the rise. If you’re already investing in other investment options, such as certificates of deposit (CDs) and mutual funds, venturing into the stock market will further enhance your portfolio diversity.

Easy Access

You never know when something might come up that requires you to cough up a large amount of cash. Buying shares of stock rather than other investments — such as CDs, which require a long-term commitment — allows you easier access to your money. You can buy and sell shares whenever you need to without penalty.

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