How do you buy and sell stock?
- When you buy stock in a company, you become a part owner. In other words, you buy yourself a share of the company.
- Most investors buy and sell through stockbrokers. Stockbrokers are trained and registered to sell stock and bonds.
- Stockbrokers used to meet to buy and sell stock in a building called a stock exchange. Now, all trades are done electronically. Each stock exchange focuses on certain kinds of investments.
Examples: In Canada, investors can buy stocks on the Toronto Stock Exchange (TSX) and the TSX Venture Exchange. The Montreal Exchange doesn't sell stock, but it does sell more specialized investments.
How do stock prices get set?
- Before a stock can be bought or sold, the buyer and seller have to agree on a price.
- Using a computer network, stockbrokers will try to work out a price that both sides can accept.
- There are usually several investors trying to buy and sell stock in the same company at the same time. It's something like a big computerized auction.
- Once a stock is bought or sold, the price is posted so that everyone knows the latest price. Stock prices can change quickly and often.
Why do stock prices change so much?
- Many factors affect the price of a stock.
- In simple terms, a stock's price rises when there are more people wanting to buy a stock than there are people who want to sell it. People compete to buy the stock if they believe that the price of the stock will rise and they will make a profit.
- A stock's price falls if there are more people who want to sell a company's stock than there are buyers. Sellers compete to offer the lowest price to a buyer.
Remember: You don't know if a stock price will go up or down
Your stock investments can lose money as easily as they can make money. That is one reason many people use an adviser to help them decide which stocks to buy, and when to sell.
Content in this section is provided in partnership with the Investor Education Fund, a non-profit organization promoting financial literacy to Canadians. To find out more go to GetSmarterAboutMoney.ca.