The Stock Market is the place where investors trade in stocks, which are also called shares, and duly called so because these shares represent ownership in a public company.
If you heard about the stock market, you might have also tried to invest in it or probably want to invest in it like others. In this article, we shall discuss stock markets and how they work.
The Connection Between Stocks And Companies:
Stock indexes and exchanges are not as complicated as you think. You can become a stock investor with ample knowledge and small investments. These small investments will increase throughout your working years compounding into a sizable amount.
Stocks are also known as equities and play a great role in the company’s growth, accomplishments and maturity. Many established companies have private shareholders, while some companies need investment from the public. In return, these companies allow the public investors a share of ownership in the company. The companies reward shareholders who may be individuals, institutions, or companies if they do well in their business.
Companies can also pay dividends, improve the value of earnings per share or alter the earnings per ratio.
How Does the Stock Market work?:
The stock market allows investors to buy and sell stocks by facilitating transactions. Investors can buy and sell stocks of the company instead of the company selling stocks directly. So basically the stock market turns into an auction house for buyers to buy stocks at a unique price and sellers wish to rid of their stocks at different prices.
Why Do Stock Prices Rise And Fall?
The main reason for the rise and fall of stock prices is solely due to supply and demand. If a certain company’s stocks are in demand, the investors drive the prices up. If the investors decide to sell their stocks, this will create more stocks available. This will cause the price of stocks to go down. The price that investors pay to buy and own stocks makes him categorically a shareowner of the company.
So why does it look like there is more demand than supply, do people purchase all the shares?.
The real transactions in the stock markets happen because of market makers. Market makers influence the demand and supply in the market by holding the shares and doing the inputs of buy and sell orders.
Bull And Bear Market Outlines
The emotion of the investors often influence market sell and buy trends. You might have heard of this before? Investors often talk about 'Bear markets' and 'Bull markets'.
Do you have any idea about it?
Here it is...
The Bull market occurs when investors feel positive and excited about economic growth in the market. Naturally, investors will start purchasing shares, and additional purchases will encourage prices to go up all the while growing your wealth.
The exact contrast is the Bear market, investors will have times of fear when the stock prices go below 20%. That’s why there are very few bear markets and investors usually profit well.
What Are The Simplest And Best Stock Market Strategies?
Some of the strategies that are often highlighted by market investors are:
Growth Investing: A simple strategy that involves buying stocks when you experience rapid growth in future bull markets.
Dollar-cost Averaging: Strategy for purchasing investments regularly.
Momentum investment: Purchasing stocks beforehand while predicting an uptrend.
Value Investing: Strategy for searching undervalued stocks, believing they are discounted stocks.
There are many more strategies for succeeding in stock markets which we shall reveal to you later. You can try buying individual stocks or mutual funds also. However, the greatest investment strategy is to invest in the long term.
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