What is the Stockmarket and What Does it Do?
Possible, you are planning to start your personal investing on the stockmarket. First, you really need to comprehend how the stockmarket functions before you can tell when to invest and in which type of shares; so do not just jump straight into the market. Below I will go over the main functions of the stockmarket.
The Two Core Functions of the Stockmarket
As you will see, there are 2 core and totally different functions that the stockmarket performs. One is the primary market and the second is called the secondary market.
Primary Market
The primary market is when companies issue new shares and they are offered to the original shareholders or to the public. One way to understand the primary market - think of the analogy of a new car dealer. When you buy a new car, the money you pay the dealer goes to the manufacturer less the dealer's profit. A similar scenario goes on in the primary market; the money from the selling of the new shares goes to the company minus any costs.
Companies normally offer new shares to expand; like building a new factory, to extend a new product line, or to refinance debt. This can be defined as the raising of capital by sharing the risk in return for potential higher profits.
The Secondary Markets
In the secondary market, investors can buy and sell stocks and shares. With the car comparison, we now consider a second hand car dealership. When you buy a second hand car from the dealer, none of that money goes to the manufacturer of the car. In its place, the second hand car dealer has paid for a used car from the owner and then sells it on to a new owner.
The secondary market therefore works by bringing together the buyers and the sellers. Just as you are free to buy and sell a car, you are also free to buy and sell shares at will. It is a way to turn assets into cash or the liquidity of the markets. Remember that with no secondary market there would not be a primary market.
What Moves the Markets?
Basically, you could boil down the reasons that markets move to either the rational or the irrational factors. It is, of course, a lot more intricate than that. However, there are only 3 chief motives that cause the markets to move and these are the irrational pack mentality of the investors (swings of pessimism to optimism regarding risks), the fundamental factors (such as inflation, depression or government policies), and the technical factors (such as trends in investing or the attractiveness of a product or industry.)
It is necessary to know what moves the markets so that you can make better investing decisions both for long term and short term investing. You also have to take all of the factors into consideration as a whole and not just individual factors if you want to take minimal risks. Learn and gain knowledge about the stockmarket before jumping in and you may make a better return on investment than if you just kept your money in a savings account. - 23226
The Two Core Functions of the Stockmarket
As you will see, there are 2 core and totally different functions that the stockmarket performs. One is the primary market and the second is called the secondary market.
Primary Market
The primary market is when companies issue new shares and they are offered to the original shareholders or to the public. One way to understand the primary market - think of the analogy of a new car dealer. When you buy a new car, the money you pay the dealer goes to the manufacturer less the dealer's profit. A similar scenario goes on in the primary market; the money from the selling of the new shares goes to the company minus any costs.
Companies normally offer new shares to expand; like building a new factory, to extend a new product line, or to refinance debt. This can be defined as the raising of capital by sharing the risk in return for potential higher profits.
The Secondary Markets
In the secondary market, investors can buy and sell stocks and shares. With the car comparison, we now consider a second hand car dealership. When you buy a second hand car from the dealer, none of that money goes to the manufacturer of the car. In its place, the second hand car dealer has paid for a used car from the owner and then sells it on to a new owner.
The secondary market therefore works by bringing together the buyers and the sellers. Just as you are free to buy and sell a car, you are also free to buy and sell shares at will. It is a way to turn assets into cash or the liquidity of the markets. Remember that with no secondary market there would not be a primary market.
What Moves the Markets?
Basically, you could boil down the reasons that markets move to either the rational or the irrational factors. It is, of course, a lot more intricate than that. However, there are only 3 chief motives that cause the markets to move and these are the irrational pack mentality of the investors (swings of pessimism to optimism regarding risks), the fundamental factors (such as inflation, depression or government policies), and the technical factors (such as trends in investing or the attractiveness of a product or industry.)
It is necessary to know what moves the markets so that you can make better investing decisions both for long term and short term investing. You also have to take all of the factors into consideration as a whole and not just individual factors if you want to take minimal risks. Learn and gain knowledge about the stockmarket before jumping in and you may make a better return on investment than if you just kept your money in a savings account. - 23226
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posted by X - Men @ 9:37 AM
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