You might find yourself asking the question: Why does the stock price increase solely because there is more demand? The answer is that when demand increases, eventually buyers outnumber sellers, and these buyers are willing to pay more for the stock. This means that there are buyers competing to get stock in the company, also known as shares, and the price will rise. The opposite would happen if you were dealing with a decrease in demand for a stock because, in that case, there would be more sellers than buyers, causing the sellers to drop prices because they are competing with other sellers.

Now, you may be wondering why people are so interested in stocks. Many people spend hours following the Dow Jones and other stock market indicators, but most high school kids don’t know why. The answer is simple; other than getting a good education and a job, stocks are the number one way to make money. In the course of its lifetime, the stock market has averaged 9% growth per year, and in the long run, over 90% of stocks see a rise in prices. So, not only are you beating inflation by investing in the stock market, but you are also making far beyond what you would with any reasonable alternatives. If you stored money in a savings account, your money would experience roughly 1% growth at max, and bonds make about 4.8% in interest a year. With today’s high schoolers needing an estimated five million dollars to retire, making as much money as possible is critical.

Many high school students are overwhelmed by the idea of getting involved in the stock market, mainly because it seems so complicated and foreign to them. Our overall goal is to make stocks easy for the average high schooler to understand. Now that you understand what a stock is, you will need to know how to go about buying them. For a high school student, we recommend an online brokerage (a company that facilitates the trading of stocks on the Internet) because of their low cost and simplicity. We both have Scottrade accounts, and we would recommend one to anyone who wants to get into buying stocks. You need $500 to start an account, and you can purchase and sell almost any stocks for a flat rate of $7 a transaction. You must be 18 to have your own account, but luckily Scottrade makes it easy to set up a custodial account, an account in a parent’s name that the child has control over.

Keep in mind, though, that stock brokers make money whenever you make trades. This means that a broker should be considered a salesperson first and an advisor second. Make sure when you invest in a stock you are doing it because you believe the company will succeed. The stock price depends completely on how the company is doing and investor confidence in how the company will do in the future. This is our first word of advice on purchasing stocks, and next month’s article on choosing the right stocks will explain other ways to evaluate stocks you are considering buying.