The Stock Market for Beginners [Quick Guide]
The Stock Market for Beginners [Quick Guide]

The Stock Market for Beginners [Quick Guide]

The concept of the stock market has been around since the 1500s when the concept of trading began and was generally recognized as an act comprised of trading shares.

Nowadays we know it simply like the stock market and it has grown in popularity to include buying and selling of stocks that get traded over the counter or on the physical exchange itself.

They are referred to also as equities, which are offered to buyers as part of a fractional share of any given company that is participating in the trading.

So, this serves as a platform for buying and selling assets of the company itself and it is fundamental to the world economy that the stock market functions at an optimal level at all times.

The advantage is two-fold, not only do investors get something out of it, but companies also have access to quick capital that is provided by the public which they use to expand their own business. The recommended site for further information for you is here.

If for instance, a company delivers a million shares of its stock to the public with a market value of $10 per share, when people purchase these items it provides the company with $10 million capital which it can use to expand its business and keep the ball rolling.

Some hire investment banks that handle their shares for them and as such, pay fees towards this. One main advantage of offering routine shares to the public is that they then do not need to borrow any finances from any institutions that may accrue debt and interest fees.

New York Stock Exchange

1792 was the year the New York Stock Exchange began in the United States and has grown to become the biggest exchange in the world.

Some of the world’s largest markets and companies trade their stock through this establishment. Other countries have their standard exchange as well such as Germany and France, however, they are not as big as NYSE.

Now we have electronic trading platforms that make it easy for anyone to participate in the act and trade as much as they like, buying and selling shares at the same time.

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The Process Involved

As previously mentioned, the majority of the shares are traded on exchanges such as the NYSE, but some other types can be bought over the counter or OTC. These are known as unlisted. Listed names are those that are on the NYSE and more information about these can be found online, for instance, this website https://www.investopedia.com/terms/o/otc.asp.

This is done through a dealer, also known as a broker who handles the number for the individual or company. These types do not meet the minimum price requirements and are typically smaller companies.

Other types of securities are also traded and these brokers tend to negotiate prices between one another over IT technology platforms and this form of trading can also help promote financial backing and equity while also raising capital for the companies once the stocks are sold.

Some of the most commonly viewed variables to determine which stock is good or band are:

  • Market Capitalization (market cap) – the total value of shares available on the market to trade.
  • Earning reports – provided by publicly traded companies to the public. Acts as an indicator of how well the company is doing.
  • Financial Ratios – Checked for indications of growth, profitability, the stability of the company. Examples are Price to Earnings Ratio (P/E), Debt to Equity, Profit Margin, and Return to Equity Ratios (ROE), Return of Assets (ROA), to name a few.

The Various Entities Involved

Several people have made this type of financial investment a part of their career. While one can spend all day trading on the exchange or the various platforms available electronically. There are a few that are key players in the market. The three main ones are investment bankers, banks, and brokers.

When a company first decides to become a publicly-traded entity and wants to start selling its stocks, this institution handles the initial public offering or IPO (the first sale of stocks issued by a company).

Investment banks handle the initial public offering (IPO) of stock that occurs when a company first decides to become a publicly-traded company by offering stock shares. Parties interested in these stocks are mainly mutual fund companies or pension funds i.e. large institutions.

Then there are fund managers, brokers, or portfolio managers who are also chief players in the spectrum and whose decisions are heeded by the majority of the public due to their extensive knowledge and how they play out to the investor’s advantage.

For instance, in the review of Motley Fool Rule Breakers, it is recommended that the best stocks on the market for any investor including the ‘hyper-volatile’ ones are the passive names to go for to make the most profits. But the goal post will keep changing in this type of business and one needs to be on top of their game.

Hence, these stock-picking services help certain individuals who are ready to invest in high-risk numbers but also ones that have the biggest returns.

In the end, it depends on you to choose the best platform for your participation depending on how much spend you have.

There are tons of information just about this one topic, however, this article may help give you a good idea of the overall picture.

 

If you’ve got a money saving tip, some advice, or ideas you think our audience would be interested in, then we’d like to hear from you. Now you can write about Trading.

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