What does the share volume mean

Stocks - basic knowledge

What is the significance of stocks?

The importance of shares results on the one hand from the financing needs of companies and on the other hand from the fact that investors are interested in investing their savings profitably. So shares serve as a financing as well as an investment and speculative object. In their financing function, stocks serve to raise equity for companies. Since shares usually have a higher issue price than their nominal value when they are issued (what are shares?), The equity capital increases with a share issue. Companies can finance themselves both through equity (e.g. share issue) or outside capital (e.g. loans).

As an investment object, stocks offer two possible sources of income: dividends and price gains. In the long term, they generated a higher return than bonds. It is important, however, that there are not always causal relationships between corporate success and the price development of a share, especially in the short term. Rather, it is not just economic but also psychological factors that can motivate investors to buy and sell stocks. It can be observed that investors often buy stocks - for fear of missing out on further profits - even when they have already risen sharply and are expensive. At the same time, shares are often not sold even after losses - in the hope of a trend reversal.

Predictions about future prices are therefore only possible to a limited extent. In addition, stocks can be subject to strong fluctuations and are therefore more suitable as an object of speculation in the short term.