What is Stock Market?
The stock market is a combination of public markets existing for distribution, buying, and selling. These are either trade on over-the-counter or exchange.
Stocks are also referred to as equities that signify fractional proprietorship in a business. Therefore, the market is the central unit where investors come to buy and sell their proprietorship of the investible resources.
A fully functioning market is said to impact the development of an economy because it provides the ability for companies and businesses to conveniently get access to resources from the public. In this article, we talk about the important facts that you need to know before dwelling on the market.
What are the Purposes?
The stock market graph has two main purposes. For starters, it provides resources to companies so that they can expand their businesses. If, for instance, a company is issuing a hundred thousand shares that were going for $10 per share, this gives the company a total of $1 million in capital which is used to expand its business.
The capital obtained is after deducting the company fee paid to the bank they are investing in for managing the offering. Since the company offers shares in place of borrowing the capital, it saves a lot as it doesn’t incur any debts and the interest charges that follow.
The second purpose served by the stock market graph is giving the investors who buy an opportunity to share the profits from the open trade companies. Investors benefit from buying by getting payments from regular dividends. They also benefit by selling what they own for a certain profit when the cost goes higher than their buying price.
For instance, when an investor acquires shares from the stock market graph of a company at $5 per share and later the price increases to $10 per share, they will obtain a clean 50% profit when they sell their shares. That is how this industry operates in a nutshell.
Trading (Exchange and Over-The-Counter)
In the stock market, the majority are exchanged while trading. These exchanges aid in facilitating the buying and selling to investors. Government agencies are responsible for regulating these exchanges and watch over the market to safeguard investors against financial fraud. What’s more, the agencies ensure the exchange market functions efficiently.
While the majority are exchanged during trading, the remaining percentage is traded over the counter. OTC is whereby both sellers and buyers trade pass through a dealer while trading.
The dealer, also known as the market maker is responsible for dealing with the stock market graph. In other words, OTC products are those that fall short of the minimum cost or requirements listed on exchanges.
Players in the Market
The stock market graph trading has a constant number of participants. These participants include investment banks, investors, and brokers.
Investment banks deal with IPO (Initial Public Offering) that takes place when an institution becomes a publicly traded entity and thus offering its shares. IPO shares are widely purchased by big and recognized investors like mutual fund institutions or pension funds.
The initial market is said to be the IPO market. Therefore, upon issuing product in the primary market, all trading happens via the stock market graph and exchanges in the secondary market.
Brokers are responsible for buying and selling for their clients who are either separate retail or institutional investors.
Fund or portfolio managers comprising the mutual fund, hedge fund, and EFT managers are essential participants in the stock market graph because they are responsible for buying and selling in large capacities.