We know that most people get confused when they hear the term stock market. But is it as complicated as it is made to be? The answer is no, it is not that complicated and to prove this we are going to break down all the necessary details so when you finish reading this article you will be confident enough to understand the stock market.
The stock market, or equity market, is a series of exchanges where shares in public companies are issued, bought, and sold. Its role is to give private investors a way to own a stake in a listed company while providing the companies themselves with capital to reinvest in their business. Every country has its stock market. However, it doesn’t matter where are you from or where you live as you can buy and sell different stocks from different countries on many different online platforms.
Here is a list of the major famous stock markets around the world that you might be interested in:
New York Stock Exchange
Nasdaq (US)
Shanghai Stock Exchange
Euronext
Japan Exchange Group
(Tokyo Stock Exchange)
How does the stock market work?
All around the world to raise money, companies sell their shares. At their foundation, these markets operate on supply and demand dynamics, with share prices fluctuating based on companies’ perceived value and overall market conditions.
The shares are issued in their stock through a process called an initial public offering, or IPO. Once a company’s stock is on the market, it can be bought and sold among investors. Often people who want to buy a certain company’s stocks end up buying it from an investor who is selling the stocks not from the company itself. The same will happen if you want to sell a stock, you’ll sell to another investor who wants to buy. These traders are handled through a stock exchange, with a broker representing each investor.
Please note that stock market opening times vary in each country, depending on the local working hours and culture. It is a good idea to consider these different time zones if you want to trade or invest in different markets. You can search for this information on the Internet.
The stock market is not a stable market it fluctuates depending on many outside factors such as global politics and economic events. If a company is doing well and its stock is popular the price goes up. If the economy isn’t doing so well or that company has a bad day in the press, the price may go down dramatically. These fluctuations impact how much your share of that company that you already bought is worth in your portfolio. If you decide to sell your shares while the stock price is up, you may get more money in the sale than you initially paid. If the stock price is down when you sell, there is a chance you’ll lose money. Also, to have a clear picture of your gains or losses, please consider additional fees you might be charged while you exchange your stocks.
History of the Stock Market
The first stock market appeared in Europe in the 16th and 17th centuries, mainly in port cities or trading hubs such as Antwerp, Amsterdam, and London. In the late century, stock markets began appearing in America, notably the New York Stock Exchange which allowed for equity shares to trade. Today, there are many stock exchanges in the U.S. and throughout the world, many of which are linked together electronically.
Different types of stocks
There are different types of stocks available on the stock market. Understanding the different stocks is vital to grow your portfolio and investments. The main categories of stock are:
Preferred stocks are the ones that give holders regular dividend payments before dividends are issued to common shareholders. But don’t forget that you don’t have voting rights.
Income stocks: If you are looking for regular income, you can consider these stocks where you can make income from the company’s profits, or excess cash, through dividends that are higher than the market average.
Blue-chip stocks are shares of well-established companies with a large market capitalization.
ESG stock: if you want to invest your money into sustainable stocks, you can consider ESG stocks as they emphasize environmental protection, social justice, and ethical management practices.
How do you invest in the stock market?
Many studies suggest that over a long period, stock generates investment returns that are superior to those from every other asset class. There are different ways to invest in stocks. You can either frequently trace stocks to generate an income or you can include these stocks in your long-term portfolio. First of all, you do a detailed analysis of the stocks.
There are many available online platforms where you can sell and buy stocks. We recommend you inform yourself about additional fees that might arise from trading or withdrawing.
Also, it is a good idea to keep an eye on your tax responsibilities depending on the country where you pay your taxes. If you are not using a local bank, you might have to declare your taxes related to your gains from stocks.
Evaluate your risk capacity. The stock market is considered to be medium to high risk depending on the stock market and your financial goal. If you are a long-term investor, learn to be patient. You can choose start-up stocks or stocks of the big companies that have been on the market for ages. If you choose to invest in young stocks don’t forget that young stocks require time to mature.
However, if you’re not sure what type of investment to pick, or concerned you might take on too much risk, there are plenty of free websites packed full of detailed fund and stock market information. You can visit Jeton’s blog to get an idea about which stocks are suitable for your financial goals.
