Amazing Kids! Magazine

Investing in the Stock Market

By Fatima

 

Investing in the stock market can seem like a scary and intimidating concept. Although it is rue that investing money in businesses can be risky, understanding how investing works and the different ways to invest can help you make smarter financial decisions in the future.

The main aim of every business is to make money. Businesses accomplish this by hiring people to perform services, such as hiring lawyers to provide legal help to those in need, or by creating products to sell. However, when a business is just getting started or needs extra help, they can look to investors to help provide the money and tools they need to get the business started. For example, if I was looking to create a fashion line, I would need to find investors to give me money so that I can buy fabric and hire seamstresses. If, say, I am running a cookie business, and not a lot of people are buying my chocolate chip cookies, I would ask for money from investors to help pay for different kinds of dough or better cookies.

In return, investors typically get a share of the business after investing some money. A share is basically a “piece” of the company. Based on how many shares you have, or how much money you invested in the company, you can, in return, receive a portion of that the company makes. However, there is still lots of risk involved in investing. If you invest money in a company, but the company does very badly, then you will not receive much money back and will have essentially lost some of your funds. The more money you invest, the more money you could either lose or gain.

Obviously, no one can accurately predict which businesses will do very well in the future and will do badly. However, certain people spend their lives studying different businesses and predicting which ones will do well and which won’t. If you want to invest your money, but don’t know which businesses you should invest in, one good option to consider is investing in mutual funds. When investing in mutual funds, you essentially give the money you want to invest to a investment manager who has studied different businesses, and let him or her invest your money for you. In exchange, your investment manager will typically take a portion of the money you make if the investment goes well. Mutual funds are a lot less risky than simply investing money by yourself since you get to rely on the expertise of investment managers. However, if the investment goes well, you won’t get to keep all of your earnings.

Although investing can be a risky business, it can also be very helpful if all goes well. Understanding all your options and learning more about the stock market can greatly help improve your investments and help you make smarter financial decisions.

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