Investing in stocks means buying shares owned by a public company. Those small stocks are known as company shares, and by investing in those stocks, you expect the company to grow and perform well over time. When that happens, your shares may become more valuable and other investors may be willing to buy them for more than what you paid for them. That means you could make a profit if you decide to sell them.
All investments involve a certain degree of risk. If you intend to buy securities, such as stocks, bonds, or mutual funds, it's important that you understand before investing that you could lose some or all of your money. Unlike deposits in banks insured by the FDIC and credit unions insured by the NCUA, the money you invest in securities is usually not insured. You could lose your capital, which is the amount you have invested.
That's true even if you buy your investments through a bank. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people achieve financial freedom through our website, podcasts, books, newspaper columns, radio programs and premium investment services. For example, let's say you're 40 years old. This rule suggests that 70% of your investable money should be in stocks, and the other 30% in fixed income.
If you take more risks or plan to work beyond the typical retirement age, you may want to change this ratio in favor of stocks. On the other hand, if you don't like large fluctuations in your portfolio, you might want to modify it in the other direction. At the end of the 18th century, stock markets began to appear in the United States, in particular the New York Stock Exchange (NYSE), which allowed stock trading. Therefore, when you buy a share in the stock market, you don't buy it from the company, but from some other existing shareholder.