How Does Stock Market Work

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What is the Stock Market and How Does it Work?
By D Wood
May 3, 2012
We all hear news about the stock market everyday, we all know whether it is up or down, whether it has had a good or bad day, week or month. We all know fortunes can be made, or lost on it. But how many of us truly know what it is and how it works? The development of personal computers has resulted in more and more people investing their money, from home, in the markets. If you want to become an investor, it is important, therefore, to train in the art of trading. In order to be an effectual investor, you must learn the basics of the stock market.

The very first stock market dates back to the 17th, when the Amsterdam Stock Exchange first introduced and pioneered continuous …show more content…

Stocks are the means through which companies are able to raise money. Simply put: Stocks are the shares of a company that the owners sell in order to raise capital. When you own stock, you own a part of the company. A dividend on a share is that share's portion of the company's profits. For example if the company has 10 owners, and it makes a profit of $100,000 in the year, each owner would receive $10,000. The dividends are usually paid yearly.

The value of the share (or stock) will go up or down depending on how the value of the company fluctuates. However, if the stocks go below what you paid for them, you will not loose money unless you sell your stocks at that price. You may well recover from the paper losses when (and if) the value of the stock rebounds. However, always keep in mind that stocks do NOT offer a guaranteed return. You must choose them carefully. It is important to have a certain level of knowledge.

The companies that wish to sell shares must be publicly held. This means they must allow investors (people like you and me) to buy their stocks through an open market. The stock market is that open market. There are two main reasons for a company to want to sell shares. It is the way for a company to raise capital (money) in order to achieve its objectives, such as expansions and improvements, without having to borrow the money. Shares may also be sold when the owners want to reduce their holdings in the company and generate cash

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