stocks
There are private companies and public companies. The difference between the two is that private companies have private owners, whereas public companies are openly traded on the stock market and have many "owners". Every time you buy stock in a company, you are technically becoming a part owner of the business. Stocks are very volatile compared to other types of investments, such as bonds and mutual funds, in that the price can fluctuate up or down drastically at any given moment. People buy stocks in hopes that they can sell it for a higher price than they bought it for; these gains are called capital gains.
Example: You bought 200 GoPro (GPRO) shares on 2/7/2016 for $10 a share, total investment of $2000. You then sell your 200 GPRO shares three weeks later on 2/21/2016 for $12.50 a share, netting you a total of $2500.
Net proceed from sale of shares - initial investment = profit/loss
$2500 - $2000 = $500 profit
dividend paying stocks
Dividend paying stocks are essentially the same as regular stocks, however with dividend paying stocks, as an owner of them you will get paid a quarterly dividend. What's a dividend? Dividends are sums of money paid out to stock shareholders every quarter from the company's profits. So, if you own one of these stocks during the dividend dates, you will be paid the dividend per share you own, right into your account. These are good investments as they are typically less volatile than regular stocks and they provide steady income. These stocks give you the potential to earn money through both dividends and capital gains.
Example: Say you owned Walmart (WMT) stock during the dividend dates for the last quarter of 2015. WMT's dividend was $.49 per share owned. If you owned 100 shares of WMT, you would have been paid out $49 into your account, just for that quarter. If you owned it all year and the dividend amounts stayed the same, that's an extra $196 in income for you. Let's also say you bought the 100 WMT shares on the first day of 2014 for $75 a share. One year later, you sell the shares for $85 a share. Your total investment gain/loss would be as follows:
Dividends + net proceeds from sale of shares - initial investment = profit/loss
$196 + $8500 - $7500 = $1196 profit
