A Quick Guide to the Stock Market and Its Significance
What is the Stock market?
The stock market is a broad term that refers to an area or venue where the buying, selling, and issuing of shares of publicly held companies take place. A stock exchange is where you go for stocks to buy. A good way to visualize it is that a stock exchange is a store you go into to participate in the stock market that encompasses the entire country, you could choose to buy that item from this company, and if the price of that item is the future could be more than what you bought it for which you can then sell for profit.
Importance of the stock market
The stock market is an important economic tool as it shows to everyone who wishes the visible cash cost for each share for a specific company, this can then be used to plot out the general economic trend of the country based on the rise and fall of prices. This allows for the general public to use their hard-earned money to make more money for them by buying shares that are low, but you expect to rise soon which you then sell for a profit; this is what people do when they say they are investing in stocks. This also allows companies to get the money that they can use to further expand their business without having to raise it themselves, this is important because time is money in the business world and money now is more valuable than money later as money now can start your to the path to making more money, but money later could mean that path has already closed.
The factors that affect the stocks of a particular company are numerous and far-reaching meaning that at its core while its fully possible to predict the stock market trend if you have all the information available, it’s unlikely to impossible to have all that information and so you always operate with a certain level of uncertainty. This is one of the few ways you can make money work for you and have a chance of increasing it by a considerable amount without having to physically do business.
What are stocks
Stocks are equity or a fraction of ownership of the business/company, there are many different types of stock but the ones most people would know of and generally encounter are the common stock and the preferred stock.
Those two categories are the broad terms for all stocks and can be further broken down but what it boils down to is that common stock is just partial ownership of the company, so in theory, you own a certain percentage of all the assets the company has which means if the company becomes more valuable you own a greater amount even if the percentage remains the same.
Preferred stock is the type of stock that the company usually internally distributes if it distributes it at all as it gives the owner preference over common stocks meaning that the money they would get from the stocks is prioritized first and even open them up to dividend payouts from the company but most of the time these types of stocks are usually given to employees instead of or in addition to their wages and are not traded publicly.