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
In fact, the stockmarket is divided into two distinct and different types of markets. One is the primary market and the other is the secondary market.
The Primary Market
The primary market is when companies issue new stocks that are obtainable to the original shareholders or to the public. The best way to understand the primary market - think of the resemblance to a new car dealership. The money you pay the dealer for your new car goes to the manufacturer minus the dealer's mark-up. A similar scenario goes on in the primary market; the money raised by the new shares goes to the company minus any costs.
Normally, companies offer new shares for expansion; like building a new factory, to extend a new product line, or to refinance debt. This can be explained as the raising of capital by sharing the risk in return for possible higher profits.
Secondary Markets
The secondary markets are where the public can sell and buy shares and stocks. With the car equivalence, we now take a second hand car dealership. If you buy a second hand car from the dealership, the money does not go to the manufacturer of the car. In its place, the second hand car dealer has bought a used car from the owner and has now sold it on to a new owner.
This way of bringing sellers and buyers together is how the secondary market of the stockmarket functions. Just as you can buy and sell a car, you can also buy and sell shares when you want. It is a way to turn assets into cash or the liquidity of the markets. Remember that with no secondary market there would be no primary market.
What Makes the Markets Move?
In essence, the reasons that markets move can be boiled down to either the rational or the irrational factors. It is, of course, a lot more intricate than that. There are however only three 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 depression, inflation or government policies), and the technical factors (as an example - trends in investing or the popularity of an industry or product.)
What moves the markets are important factors to consider both for long term and short term investing. You must take into consideration all of the factors as a whole and not just individual factors if you want to take minimal risks. By learning and gaining knowledge about how the stockmarket works, before starting to trade, you will be able to make a healthier return on investment than merely keeping your money in a fixed interest security or savings account. - 23200
The Two Core Functions of the Stockmarket
In fact, the stockmarket is divided into two distinct and different types of markets. One is the primary market and the other is the secondary market.
The Primary Market
The primary market is when companies issue new stocks that are obtainable to the original shareholders or to the public. The best way to understand the primary market - think of the resemblance to a new car dealership. The money you pay the dealer for your new car goes to the manufacturer minus the dealer's mark-up. A similar scenario goes on in the primary market; the money raised by the new shares goes to the company minus any costs.
Normally, companies offer new shares for expansion; like building a new factory, to extend a new product line, or to refinance debt. This can be explained as the raising of capital by sharing the risk in return for possible higher profits.
Secondary Markets
The secondary markets are where the public can sell and buy shares and stocks. With the car equivalence, we now take a second hand car dealership. If you buy a second hand car from the dealership, the money does not go to the manufacturer of the car. In its place, the second hand car dealer has bought a used car from the owner and has now sold it on to a new owner.
This way of bringing sellers and buyers together is how the secondary market of the stockmarket functions. Just as you can buy and sell a car, you can also buy and sell shares when you want. It is a way to turn assets into cash or the liquidity of the markets. Remember that with no secondary market there would be no primary market.
What Makes the Markets Move?
In essence, the reasons that markets move can be boiled down to either the rational or the irrational factors. It is, of course, a lot more intricate than that. There are however only three 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 depression, inflation or government policies), and the technical factors (as an example - trends in investing or the popularity of an industry or product.)
What moves the markets are important factors to consider both for long term and short term investing. You must take into consideration all of the factors as a whole and not just individual factors if you want to take minimal risks. By learning and gaining knowledge about how the stockmarket works, before starting to trade, you will be able to make a healthier return on investment than merely keeping your money in a fixed interest security or savings account. - 23200
About the Author:
William Wilkie is a writer of personal finance services and products. Visit his site to learn about the best Identity Theft Program and read the TrustedID Review.
posted by X - Men @ 3:58 AM
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