Why do I buy Stocks?

Those who buy shares/stocks become owners and are called shareholders. Now they have claims not only on the profit or Earnings that the company is making, but also on the Assets or the properties that the company possess.

So, you as a shareholder own a part of the property. Now, along with it comes the voting rights. If they’ll need your vote or not is a different story. We can discuss it in some stage, not now. Let’s keep things simple as of now.

You receive Dividends or claims on a part of the profit of the company if the company board of directors, or the higher management, agree to pay you. Dividend is not therefore guaranteed. We will discuss details about it in the dividends section.

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What are stocks or shares?

In layman term – stock/share/equity represent ownership in a company.

If I own a stock in a company, I am one of the owners as I am investing some money in the company. The more I buy stocks, the more is my ownership. I then own a part of the assets or properties and the profits of the company.

But, owning a TATA share does not mean I can go to TATA office and pick up a chair for my home just because I seem to like the colour and design of the chair!

It’s a different kind of ownership; if the company flops and goes bankrupt, then after paying out all the debt, I can get a part of the money from the sale of the assets.

But there are risks too. We have discussed about the risks in Risks of Shares.