How Do Stock Prices Change?

There are basically two main ways to profit fromhow do you know that it will go up? What makes
buying stocks. First, many corporations pay dividendsstock prices change all the time?
to their shareholders. They may pay 50 cents perThe price of stocks goes up and down the same
quarter for each share you own. This is not requiredway that the price of anything else goes up and
of a corporation, so you may or may not be paiddown. It is an economic principle of supply and
dividends.demand. Maybe you remember that from your
You can also earn a profit through capital gain. Wheneconomic class.
you buy stock, you will pay a certain price. If in theAn increase in supply with the same demand will
future the price goes up, and this is what you want itdecrease the price. An increase in demand with the
to do, you can sell it and make a profit. Subtractsame supply increases the price. The price changes
what you paid for what you sold it for and this isdepending on whether and how supply and demand
your capital gain.change.
Investors are usually hoping to make capital gainsThe price of a stock will go up if there are more
when they buy shares of stock. People who are in orpeople wanting to buy than willing to sell. The price of
nearing retirement may prefer high dividend payinga stock will go down if there are more people
stocks that are stable for a source of income, butwanting to sell than there are willing to buy.
for others, dividends aren't where they expect toOnce you understand supply and demand, you can
make most of the money.understand how to make capital gains. You should try
Stock prices have to increase if you want to maketo purchase stocks that you feel will be a very
capital gains. Stock prices vary from day to day, sopopular buy in the future.