A Beginner’s Guide To The Stock Market
So what exactly is this stock market?
The stock market can look like a mysterious and puzzling space from outside. In reality however, it is simply a platform for people to publicly buy or sell their stakes in one or many of the companies that are listed.
If you buy shares of a particular company then you can claim a percentage of that company’s profits – if the company is running profitably. In case the company goes bust, then you will end up losing whatever money you invested in its shares. However, although you are entitled to the profits of the company, you are not obliged to pay up for its losses.
How does the stock market benefit companies?
You might wonder why companies would want to enlist themselves at the stock market. The answer is to raise funds. When you buy a company’s shares, the money that you spend goes to the company’s coffers where it will be used for further business development. Thus the company spends the money of the shareholders in the hope that it will make a profit which will in turn be shared with the shareholders here https://www.binarytilt.com/.
Making people invest in your company by buying your company’s stock is beneficial to most businesses because it reduces their dependency on debts and loans. They will be able to acquire funds without the need to take out huge loans or pay a large amount of interest.
What are the risks involved in stock markets?
Are stock markets risky? Well, yes. However, with increased risk, you also get increased profits. Although there is absolutely no assurance that you will definitely end up making a tidy sum of money, if you invest wisely in some reputable and reliable stocks, the chances of you earning well is pretty high.
If you are risk averse, you might actually be better off investing in other financial instruments such as bonds, fixed deposits or savings accounts. But do remember that the return on investment in such alternative financial instruments are not as high as that of stocks and shares.
If you have invested in some stock and you see that the value is dropping, don’t lose heart. Prices of stock can fall due to multiple reasons – including any adverse news about the particular company – but that is not the end of it all. You will be surprised to know how many stocks have risen in value after a nerve wracking drop. Usually if a company acquires some other business, or releases a new product that is being awaited eagerly by consumers, or if it has been portrayed positively in the news recently, then the chances of its stock value increasing is high.
There are of course a number of other factors that influence the behaviour of the stock market. Global economic conditions, oil prices, state of the housing market, a country’s political situation, extensive warfare or natural disasters – all of these could have an impact on the stock market.
How does the stock market work?
In the early days of stock market trading, stock exchanges happened to be real locations where people had to go personally to trade their stock certificates. Nowadays however, things have moved to the virtual sphere and you can trade in stocks online from the comfort of your own home. You can keep track of stock prices by following the news or checking out the finance section of your daily newspaper.
If you do not feel confident about your stock trading abilities or if you feel that you do not have the necessary time to spend on following the ups and downs of the stock market, you could also approach an investment advisor to draw up a trading strategy based on your requirements. This stock broker would then trade on your behalf, keeping in mind your financial profile and honouring your needs and requests.
Stock exchanges are present all over the world and some of the busiest ones are the New York Stock Exchange (NYSE), National Association of Securities Dealers Automated Quotations (NASDAQ), the London Stock Exchange, Japan Stock Exchange and the Shanghai Stock Exchange to name a few.
Interested in becoming a stock broker?
Usually stock brokering is a highly stressful and demanding job since it involves handling huge amounts of money of customers. The trading floor of any stock exchange is a high tension ground that is constantly buzzing with activity. While profits can make customers happy, any losses can put you in a bad position where the customer is dissatisfied with your work.
Added to this, the fact that the stock market is a highly dynamic environment with share prices and values dipping and rising constantly depending on market conditions, it is easy to see why stock brokers are under immense pressure every day at work. No wonder then that many stock brokers seem to survive on a steady stream of coffee and cigarettes!
Stock brokers need to be persuasive and energetic. They need to be able to think on their feet and should be capable of making sensible yet quick decisions. They must be able to keep a cool head even in high pressure situations and of course, an avid interest and aptitude for trading in stocks is an absolute must.