We all hear news regarding various stock exchanges and come across stock market terminology like IPOs, wall street, stock, dividend, market value, etc. every once in a while. I’m also pretty sure we’ve all seen ‘Wolf of Wall Street’ at least once. Do you however know what goes on in the stock market and the basics of trading stock? No? Then this is for you.
We cannot get into the basics of the stock market without first gaining a little knowledge on stock. A stock is basically a document representing a share of ownership in a company. It signifies a claim to a company’s assets or earnings.
The stock market is therefore a platform or a trading ground allowing individual members of the public to receive part ownership in a public company of their choice in exchange for a price of course. It allows for the buying and selling of stock. Offering up a company’s stock for sale is generally a means of raising capital.
So how does it operate? Before a company can be listed or qualified to trade publicly on the stock market, depending on the governing body, there are criteria that would have to be met. The company in question will then put up an Initial Public Offer (IPO) where the company first issues out its shares to the members of the public for sale.
Imagine a company called Sam’s Hair Co. Ltd, which has recently met all the listing requirements to trade their shares publicly and issue an IPO. This would mean that shares of Sam’s Hair Co. would be open to general members of the public to buy and sell. As long as Sam’s Hair Co. remains profitable, the shares of stock bought will most likely increase in value and can be sold on the stock exchange.
So how can you make an investment in a profitable company and how do you even know if a company is going to be profitable? The answer to this is a STOCK BROKER. Brokers are agents charged with the responsibility of buying and selling shares on behalf of clients for a fee/commission.
There are typically two kinds of stock brokers; high-end brokers who offer investment advice and are relatively expensive and discounted brokers whose services are generally more affordable but do not come with investment advice. More recently however, there online brokers that work through online brokerages; they provide investment database information for their clients. Brokers trade stocks for their clients through a brokerage account. With a little research you can find brokerage firms and agents that best suit your needs and begin investing.
There are 60 major stock exchanges in the world. The largest of these is the New York Stock Exchange, which is home to quite a number of leading firms in the world such as Ford Motors, JP Morgan Chase, Wells Fargo, etc.
Investing in stock is generally risky as there is no certainty of a company’s profitability or appreciation in value of its shares. However there are those who have made millions by making the right investment. With the right brokers and right information you too can cash out from trading stocks.