How do Stock Prices Change?

By Robbin Carols

If you purchase stocks, there are two main ways you can make money from the purchase. First of all, you can be paid dividends. When a corporation makes a profit, they may decide to pay some of it as dividends to their shareholder such as $1 a year per share, but this isn't guaranteed.

Capital gains are another way to profit from stock purchases. You buy the stock at one price and at a future time, whether it's in an hour or in 20 years, you sell it for a higher price. After you take the difference, the amount you sold it for over the amount you paid is a capital gain.

When someone buys shares of stock, they do so in hopes of profiting through capital gains. High dividend paying stocks are often sought after by retirees who are looking for a stable source of income.

In order to make capital gains, the stock price has to go up. The stock price can go up or down. It varies from day to day. How can you know it will go up and how exactly does it change?

Stock prices are affected just as the price of anything else changes. It is purely economics. Try to think back to your high school economics class when you learned about supply and demand.

An increase in supply with the same demand will decrease the price. An increase in demand with the same supply increases the price. The price changes depending on whether and how supply and demand change.

With stocks, if a lot of people want to buy a particular stock and not enough people are selling, they will have to raise the price to accommodate for it. If there are more people looking to sell than people willing to buy, they will need to decrease the price to get people to buy.

Once you understand supply and demand, you can understand how to make capital gains. You should try to purchase stocks that you feel will be a very popular buy in the future. - 23226

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How do stock prices change? Find the answer to this question and find out who issues stocks.