- Understanding the Stock Market:
- TYPES OF STOCK:
- How the Stock Market Works:
- What Are the Functions of a Stock Market?
- How Stock Markets Are Regulated?
- What Is the Significance of the Stock Market?
- Who Helps an Investor Trade on the Stock Market?
- STOCK MARKET vs. STOCK EXCHANGE;
- What Is a Stock Market Index?
- How to invest in the stock market:
- How to earn in the stock market?
In 1773 the first stock market came into being i.e. London stock exchange when
traders met at a coffee house.
Publicly held companies buy and sell their shares thus these exchanges make up
the stock market. The changes occur through over-the-counter markets and formal
exchanges regulated through a set of rules although the stock market is a free
market economy as they allow balanced access to investors’ trading and exchange
of capital. It has a balanced way of discovering prices and efficiently dealing with
them. The Securities, and Exchange Commission (SEC) and local regulatory bodies
regulate the stock market.
“Stock market” is referred to as “stock exchange”. On the other hand the traders in
the stock market, exchange the stocks by buying/selling them which are a part of
the stock market.
The top U.S. stock exchanges are New York Stock Exchange (NYSE) & the NASDAQ
Understanding the Stock Market:
As the market competes in the open market, it allows the traders/investors a fair
price, transparency, and a high degree of liquidity. The buyer and seller meet and
interact for the preferred securities before the transaction takes place.
In fact in the early days, when the stock market came into being, they were dealt with via
being presented on a piece of paper as a share certificate however now it’s an
TYPES OF STOCK:
COMMON STOCK: this is the type of security that includes ownership in a
corporation. In liquidation after the bondholders, creditors & preferred stockholders
are paid the remaining assets are received by the common stockholders. Based on
one’s appetite for risk one should diversify his/her portfolio.
CONVERTIBLE PREFERRED STOCK: the type of stock that pays a dividend and
can be converted into common stock with a fixed conversion ratio in a defined time
frame. It is a type of hybrid security with features that include equity & debt that
arises from dividend payment and conversion options.
It provides a secure and regulated environment in which a participant can transact
in shares and other financial instruments with minimal operational risk and
The stock market can act as either a primary market or a secondary one;
In the Primary market, the companies are allowed to sell their shares to the
public through a process referred to as an initial public offering (IPO) which however is
how the companies can raise capital through investors.
In the secondary market, companies split themselves into several shares; in
addition few of them are made public at a price per share.
To pursue this, a company needs a marketplace where the selling can be held to assist the investors
in buying/selling the securities they own.
The stock markets act as a facilitator and allow investors to get a dividend on the
company’s shares. The company has to pay a certain amount of fee for the services
sot upholds by the stock market
S&P (standard & poor) 500 index and NASDAQ 100 index provide a measure
to track the movement of the market which maintains the level of the market and
makes the sector-specific indicators.
What Are the Functions of a Stock Market?
- Provide price transparency, Price discovery, liquidity, and fair dealing.
- Meanwhile provides access to all the buy/sell data.
- It ensures the provision of efficient opportunities to match appropriate buy
and sell orders.
- Ensure that the orders are placed at a fair price.
How Stock Markets Are Regulated?
Monetary authority, an institute, or a local financial regulator assists in the
regulation of all the national stock markets.
The SEC regulates the U.S stock market. It is a federal agency that works
independently of the government and political Pressure alongside that, the mission
of the SEC is protecting the investors, providing efficient, order, and maintaining a
fair market with a fair capital generation.
The companies listed are thoroughly monitored and regulated by the SEC.
Although suspension can occur if certain requirements are not met i.e. Mandatory timely filing of quarterly financial reports and instant reporting of relevant corporate
What Is the Significance of the Stock Market?
- It allows companies to make income through dividends and profit through
capital gains by offering their shares and corporate bonds to the investors
- It provides investment opportunities to individuals who have to save and are
looking for investments to become a part of capital formation and play a role
in the economic growth of a country.
Who Helps an Investor Trade on the Stock Market?
Just as forex brokers are there to help forex traders whereas stock traders have a
a stockbroker who acts as an intermediary between the stock exchange and the
investor. They buy and sell stocks alongside managing portfolios and collecting
securities for their clients
STOCK MARKET vs. STOCK EXCHANGE;
They are not the same thing although they might be used interchangeably. The
the stock market comprises stocks while the stock exchange is more of a whole unit
comprising such markets as NASDAQ or New York Stock Exchange in the U.S.
When one is talking about how the stock market is performing? There referring to
their patterns and listing of thousands of companies on multiple stock exchanges.
The stock market on the other hand can consist of so many other investment tools
such as bonds, exchange-traded funds, mutual funds, and other securities beyond
What Is a Stock Market Index?
Every market has its index tracks which structure the performance of the particular
The stock market index does the same and helps evaluate the performances of a
group of stocks that belong to a certain industry or a segment of the stock market
such as technology & energy. The most used index in the stock market for the U.S
DOW JONES INDUSTRIAL AVERAGE (DIJA);
It includes 30 blue-chips stock of U.S. industrial companies.
NYSE COMPOSITE INDEX;
All the common stocks are listed on the New York stock exchanges which are
tracked through a price movement conducted by the NYSE.
It represents the largest companies in the U.S. estimated to be around 500
How to invest in the stock market:
1. Know the type of account you want to open
2. Open a brokerage account
3. Deposit money
4. Choose your investment
5. Purchase your investment
How to earn in the stock market?
There are three ways;
1. Leverage trading is a way to boost your gains on the trade in the stock
market but obviously it has its own risks, like everything else in regards to
the world of investment on trade. If you balance your moves smartly you can
2. A dividend is basically decided by the directors that help distribute a portion
of the company’s earnings. Nevertheless, the stakeholders are paid a quarterly
payment by the company. This gives the investor a stream of income.
3. Capital appreciation is the rise in the value of a security based on the
market. In this case, you buy stock and sell it the moment prices see a hike or