When a company needs money to grow, it can divide itself into millions of 'pieces' (shares) and sell them to the public. You buy one or more and become the owner of that fraction of the business.
How you make money with stocks:
- Price appreciation: The company grows, earns more, and the share price rises. You buy at $11 and sell at $17.
- Dividends: Some companies distribute part of their profits periodically to shareholders. You receive cash simply for being an owner.
In favour:
- The return potential is the highest of all listed assets.
- Many companies pay dividends — passive income paid directly into your account.
- High liquidity — you can sell in seconds during market hours.
Against:
- The bankruptcy risk of an individual company is real. A single company can disappear; an index of 500 companies cannot.
- It requires a great deal of analysis time: reading balance sheets, understanding the business, following sector news.
- If you buy on instinct without analysing, you are gambling, not investing.