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Nowadays, we hear about stocks, shares, investments, and the stock market. Trading online has become an activity that anyone can do from the comfort of their own home, office, or even on the road from their mobile phones.
Becoming a trader is also a simple process. Brokers have shifted their focus to offering services that allow investors to manage their money themselves and choose what deals they want to put their money in. Additionally, most reputable brokers are regulated by independent bodies that guarantee the safety of the investors’ information and their money.
Opening a public bank share trading account is not only easy but also fast.
But, let’s start from the beginning. What is the stock market? How does it work? We’ll explain the details you need to know in order to set up the base for successful trades.
What is the stock market?
When we talk about the stock market, we refer to the total amount of exchanges, now mostly exclusively online, where traders buy and sell shares of publicly held companies. Stock markets are a fundamental piece of the free-market economy, meaning access to the stock market is open to anyone.
Some countries have more than one main stock market. For example, in the US, the most famous ones include the NYSE (New York Stock Exchange) and the Nasdaq.
The stock market goes up and down
It is commonly said “the market closed up” or “the market is going down”. These expressions refer to the stocks in the index and their value either going up or down.
And this could be a good thing, or not, depending on where your money is and what’s your goal. In any case, these movements up and down, generate a chance for investors to make a profit.
How does the stock market work?
A stock market is a place for traders to meet, buy, and sell shares. In a way, it serves as an indicator of how healthy an economy is, as well as stimulates competition and fair trading practices.
The large volume of transactions realized every day in any stock market is regulated by independent bodies that make sure transactions are done with transparency and fair pricing practices.
It all starts with a company’s initial public offering (also called IPO). When a company decides to go public they will divide themselves into tiny parts, which we will call shares. The goal is to sell these shares and get the money from investors.
Those buying shares, now own a tiny piece of a company. Their goal may be to see the price of those shares increase, meaning the value of their initial investment is growing, or they may be interested in getting dividends from the profits made by the company. There are definitely different benefits to owning shares.
In any case, the stock market is the marketplace where these shares are bought and sold.
Why invest in stocks?
There are many reasons we can give you to convince you to include stocks in your investing profile. We are going to list some of the reasons that make stocks an option to consider.
- Build long terms savings. If looking for a long-term investment, the stock market, while may be up and down every day, has smoother trends in the longer term.
- Avoid paying taxes on the money or protect it from inflation. This is definitely an option to consider in countries where inflation poses a serious issue for those having to save in cash or the bank. With inflation, money loses its value, just because. Instead, stocks, their value is not related to the inflation index.
Maximize your revenues. If you invest safely in stocks, you have a good chance of multiplying your returns.
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