How does the stock market work?
We often hear that the stock market has reached new highs and lows at all times.
What is stock?
What do you mean? You can better explain an example Suppose you want to start grocery business You buy the premises, groceries, hire some staff, advertise and start your business.Let us say that you have invested $ 400,000 to buy a house Your income is $ 250,000 and your net profit is $ 250,000 (income) – $ 200,000 (fee)
At the end of the second year, your total income is $ 260,000 The net profit is increased to $ 60,000. Your costs remain the same. Now you estimate that your net income may still remain in this figure in your current purchase supply investment amount.
You think to expand your business. You calculate the total value of your investment, including your investment in premises, miscellaneous expenses, supplies and staff.
] In accordance with the current investment, the total value of your business is $ 400,000 ($) + $ 200,000 (grocery) + $ 60,000 (profit) = $ 660,000. Since you are making money in your business, The profit you can at your business price is $ 1,000,000 when you invite the shareholders in your business.
Suppose you invite 10 or 20 shareholders. Each shareholder will have to spend $ 1,000,000 by 10 or 20 , As an equal partner in your business. In determining business matters, each shareholder will receive one of 10 or 20 votes and have the same asset and profit ratio.
Or, you even You may want to keep half of the shares to yourself and then sell the remaining half of the shares to others. In this case, you will have a greater say in business decisions and get half of the ownership and profits.
You can divide the total value of the business by a larger number of stocks, such as 100,1,000 or even 10,000.
The stock or stock is basically really simple. It represents the company's assets and profits
Although earlier you were operating a private enterprise, but with the public participation, your business has become Listed company. In addition, shareholders may not be interested in your company to carry out their cooperation and may want to sell their shares to others.
It may not be easy to sell stocks in this case.
Therefore, in order to promote the stock trading of these large listed companies, the establishment of the stock market or stock exchange. We have examples of the New York Stock Exchange (NYSE), Nasdaq and the American Stock Exchange. They are supermarkets for buying and selling stocks.
There are two types of stock exchanges, one is a physical stock exchange and the other is a virtual stock exchange.
Physical Stock Exchange
The New York Stock Exchange – The New York Stock Exchange – is an example of a physical stock exchange. In order to trade your stock, you need to open an account with a stockbroker or brokerage firm. The New York Stock Exchange is a wild place where stock traders can see trying to shout each other and try to buy and sell stocks by hand. These people are called floor brokers. Your stockbroker actually contacts these floor brokers on the New York Stock Exchange to buy or sell your stock. Buy and sell millions of dollars a day.