What it is

Stocks are a form of investment that allows you to buy a piece of a company. Imagine you own a small clothing store and want to expand your business. You can sell shares of your store to other investors, who then become owners of a part of your company. In return, you receive the money needed to grow your business. Stocks are traded on stock exchanges, such as B3 in Brazil, and their value can vary according to the company’s performance.

Stocks are a long‑term investment, because their price can fluctuate over time. However, if you invest in solid, well‑managed companies, you can achieve significant returns over the years. For example, if you invest R$ 5,000 in shares of a company that pays an annual dividend of 5%, you will receive R$ 250 per year, which is a 5% return on your investment.

What it is

How it works

When you buy stocks, you are buying a part of the company. The price of the shares is determined by the market, i.e., by what investors are willing to pay for them. Stock prices can vary according to the company’s performance, the overall economy, and other factors. If the company is doing well, the share price tends to rise; if the company is doing poorly, the share price tends to fall.

Here are some important terms you need to understand:

  • Dividends: payments made by the company to shareholders, usually annually, as a way of distributing profits.
  • Closing price: the price of the shares at the end of the trading day.
  • Trading volume: the amount of shares traded in a given period.

Advantages

Stocks offer several advantages, including:

  • Growth potential: stocks can increase in value over time, especially if you invest in solid, well‑managed companies.
  • Dividends: many companies pay dividends to shareholders, which can provide a source of passive income.
  • Liquidity: stocks can be easily bought and sold on stock exchanges, meaning you can access your money quickly if needed.

Practical tip: It’s important to diversify your investment portfolio, i.e., not put all your eggs in one basket. This means investing in different types of stocks, such as shares of companies from various sectors and sizes.

Advantages

Risks

However, stocks also involve risks, including:

  • Loss risk: the value of the shares can drop, meaning you could lose money if you sell the shares for a lower price than you paid.
  • Volatility risk: share prices can fluctuate rapidly, which can be stressful if you’re not prepared.
  • Company risk: if the company you invested in encounters problems, the share value can decline.

Practical tip: It’s important to do careful research before investing in stocks. This includes reading annual reports, analyzing the company’s finances, and understanding the risks and challenges the company faces.

Practical examples

Let’s consider an example. Imagine you earn R$ 5,000 per month and want to invest R$ 1,000 per month in stocks. You could invest in shares of companies like Petrobras, Vale, or Itaú Unibanco. If you invest R$ 1,000 per month in Petrobras shares, for instance, you could achieve an annual return of 10%, meaning you would receive R$ 100 per year in dividends.

Here are some practical tips for investing in stocks:

  • Start small: you don’t need a large amount of money to begin investing in stocks. You can start with R$ 100 or R$ 500 and increase your investment over time.
  • Be patient: stocks are a long‑term investment, so it’s important to be patient and not get swayed by short‑term market fluctuations.
  • Monitor your investment: regularly checking your investment is essential to ensure it aligns with your financial goals.

Start today

Now that you understand better how stocks work, it’s time to start investing. Practical tip: You can use an investment app, such as Nubank, to begin buying stocks. Nubank offers an easy‑to‑use platform and low transaction fees, making it more accessible for you to start investing. Remember that investing in stocks involves risks, but it also offers growth potential and dividends. So, don’t hesitate to start investing today and achieve your financial goals.