Tuesday, March 18, 2014

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The Stock Market | How The Stock Market Works

The stock market is a means to raise investment money and method to share company profits. Initial Public Offerings are a means to raise capital for a company. Learning how the stock market works can be very tricky. Basically you need to learn the averages of the stocks that you would like to purchase. Learn when the best time is for you to buy and sell by using these averages. The return you get on a share is determined by a host of factors. Some of them are things which companies do to their share structure.  Most stocks are traded on exchanges, which are places where buyers and sellers meet and decide on a price. Some exchanges are physical locations where transactions are carried out on a trading floor. The purpose of a stock market is to facilitate the exchange of securities between buyers and sellers, reducing the risks of investing. Just imagine how difficult it would be to sell shares if you had to call around the neighborhood trying to find a buyer. Really, a stock market is nothing more than a super-sophisticated farmers' market linking buyers and sellers.
The Stock Market comprises of two main markets;
1. The Primary Market: This is a market where securities are created (by means of an IPO~Initial Public Offer)
2. The Secondary Market: This is where investors trade previously-issued securities i.e. The securities that were previously issued with the use of the IPOs without the involvement of the issuing-companies. The secondary market is what most people are referring to when they talk about the stock market. It is important to understand that the trading of a company's stock in the secondary market does not directly involve the company.


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