Remember, capital creates wealth. We should invest our money. The stock market is one way to invest. Here's a basic example of how the stocks work.
Jamal creates a business called Jamal's Building Supplies. His company specializes in selling building materials to company’s that build apartment complexes. Jamal business is doing great. But he needs more capital (money) to purchase his supplies from a supplier in China. To get that capital, he decides to take his company public, which means anyone can by a piece (share) of his company. Jamal will still be the majority owner (owns 50% or more of his company) so, he is only selling 50% of his company. He gets his company’s valuation (worth). His company is valued at $1,000,000. He is selling half of it to the public ($500,000). It’s decided that the (IPO) (initial public offering) will be $1.00 per share for the newly created stock. There will be $500,000 shares of this stock available. (500,000 x $1.00 = $500,000) half the amount of the valuation.
Meanwhile your coworker tells you about this hot IPO, that’s about to come out – word has it, this company is about to sign a big contract with a company in China. The IPO is $1.00 per share. Well, you just got your taxes back, and you have an extra $1,500. You’ve wanted a new tv, but decide to research this company. You contact a stock broker (a person who buys and sells stocks on your behalf) you ask him what he knows about Jamal's Building Supplies – he says he’s hearing good things. After you complete your research, you decide to set up an account, and tell your stock broker you would like to purchase $1,500 shares of Jamal's Building Supplies. A few minutes later, you are now part owner (stock holder) (very small part) of Jamals building Supplies. You feel good about it.
Jamal gets the money he needs and gets the contract from China, his business explodes! He does a lot of business!
Three years later, you check to see the stock price of Jamals Building Supply. It’s now trading (selling) at $144 per share. If you sold your portion of the company 1500 shares, you would have $216,000.
And that’s how money is made buying stocks.