What are stocks ? When a company reaches a certain point in development , they will want to borrow money to expand , become bigger , more powerful . They need to borrow a lot of money to do that , so they sell stocks as a loan - they are borrowing your money , and when they are earning a profit from this expansion , they decide if and how much interest to pay you for their loan , which is usually around one percent or so , just like banks when you deposit money in the banks . Here's where things get weird . You can earn a lot more than the one percent or so , but buying against the other investors . When they have confidence in or feel good about the stock , they are willing to pay more to buy them . When they loose confidence in a stock , they sell them off , often at a loss . So , if you have confidence in the company , you can buy when the prices drop and sell when the prices go up . There is one kind of stock that is better to just hold , those are REITS or Real Estate Investment Trusts . These usually have a specified interest rate that is paid annually . They"re like when you take out a mortgage to buy a home , and you pay the bank for the loan of money .