What is the Stock Market
In short, the stock market is an organized marketplace where stocks or shares of company ownership are bought and sold. If there were no organized marketplace where one could buy companies shares, investors would have to invest directly into these companies after complex negotiations, and probably at much larger amounts than what happens in an organized marketplace. Stock market provides a lot of information beyond the ability to just purchase or sell a share in a company. For one, you get the price at what others are buying and selling and what the analysts are saying about the fair price for the company. If that company price differs from the price that you think is fair, the marketplace becomes a way to own undervalued assets. Not only there may be ways to make money by buying and selling the companies shares, but the stock market also allows you to easily diversify your income sources. Typically, a person's income comes from a salary that is tied to the wellbeing of one single company and very specific area of commerce. By investing into the stock market, one can diversify wealth and income by investing into stock of companies in areas unrelated to the one that one works in. The easiest way to do this diversification is to purchase mutual funds that diversify easily for you in the stock market. For business owners, the stock market allows similar wealth diversification, as it allows the company owners to sell some of their wealth that is typically tied to one company, the one they founded, and invest that money into unrelated fields, so that all of the eggs are not in the same basket, so to speak. Between buyers and sellers, there are many types of intermediaries, including brokers, investment banks, and research companies. Their role is to facilitate the transaction between the buyer and the seller, and to provide the information to all investors so that the companies are priced in the stock market as fairly as possible within the current information. |