Many people who have never owned stock shares and even some who owned stock left to them by a parent or grandparent view stocks as an investment that can make people rich or can wipe them out financially. But the reality is that owning stock is more than simply investing a bit of money and waiting to see if it turns a profit. It means that you actually own a piece of a business and your stock dividends will depend on whether that business thrives or fails.
Understanding that the stock you purchase makes you a part owner of a company will help you to understand why picking the right stock for your stock portfolio is important. It isn't just about buying low and selling high, it's about understanding a little bit about the business you are investing in. When considering whether or not to purchase a stock share you want to either invest in a business that is already thriving and will continue to grow even more over time, or a business that has the potential to grow over time. Some people choose to invest in shares of companies that have stood the test of time and that will keep growing or at least thriving each year. While these companies will cost more to invest in and you are not likely to see rapid growth of your investment, they often pay small consistent dividends over time.
On the other hand, investing in a new company is more often cheaper, but it is also riskier, as even good businesses fail under poor leadership or in rough economic times. Still other people invest in businesses that are not growing now, but they feel will have a large growth in the future. Solar energy was one such investment that many investors took a risk on believing that in the long-term their initial small investments would be worth big bucks.
The key to investing in stock shares is to always remember as part owner of a business you will only profit when the business profits and if the business fails then as a part owner you too will suffer the loss.