When they hear the word stock market, many people quickly think of chaotic situations, screaming people and numbers that are constantly changing. This image comes mainly from earlier times. Nowadays, stock trading takes place mainly online. It is certainly interesting to know what happens on the stock exchange and what is interesting for you as an investor.
In the past, you had to physically go to the stock exchange to trade shares. Nowadays you can also trade online and there are many foreign stock exchanges available for investors.
What Is a Share?
When a company needs money, it may choose to issue shares. These shares are securities that represent the capital of the company. You could say that the entire capital of the company is divided into small pieces.
- The shares are offered on the stock exchange. In principle, anyone can buy the shares on this market and also sell them again. You can buy shares in any company that is listed on a particular stock exchange. In the US alone, there are many thousands of companies listed, ranging from large to small and from different industries. Source: Commoditytradealert.com
The History of the Stock Market
The Verenigde Oost- Indische Compagnie (VOC) from Amsterdam can be considered the founder of today’s stock markets. This company was founded in 1602. Before that, it traded in shares, but the VOC ensured that there was a lot of share trading.
The VOC issued shares to finance a sea voyage. Any resident of the then Republic of the Seven United Provinces could deposit money and pay it off in instalments. If the sea voyage was a success, the VOC divided part of the profits among the lenders. If the voyage was a failure, the shareholders lost their money to brokers at Brazil.
Since most voyages were very successful, the VOC shares quickly rose in value. It was also possible to exchange these shares with each other, which led to a brisk trade in VOC shares. The VOC ceased to exist in 1798 and so did share trading. At the beginning of the nineteenth century, the stock exchanges as we know them today came into being.
The Difference Between the Stock Market and the Stock Market
Many people think that a stock market and a stock market are the same thing, but it is not quite the same. By a stock exchange, we basically mean a stock exchange. Securities is a collective term for shares, bonds and other negotiable securities. The part of the stock exchange where only shares are traded is, in principle, the stock market. On the options exchange, on the other hand, only options were traded.
We Call It the Stock Market, Don’t We?
Stock market, the stock market… It’s all the same, isn’t it? Well, not really. When we talk about ‘the stock market’, we mean the stock market. Well-known examples of stock exchanges are: the New York Stock Exchange, Nasdaq and Euronext Amsterdam. I’m sure you’ve heard that before. What are securities then? They can be shared. But also bonds and, for example, options.That is why the term ‘stock market’ does not entirely cover it.
So How Does It Work When You Invest in Shares?
If you invest in a share you are, to put it very simply, the owner of a part of that company. You pay a price for this. The price is the price at the time of purchase. If you invest in Netflix, you are therefore co-owner of part of it. But of course Netflix is very popular, they usually show good growth figures. A lot of people therefore find it interesting to invest their money in Netflix. This also makes the price (= the price) higher. This price can of course be lowered at times when investors have less confidence in the company.
The Stock Market Revolves Around Supply and Demand
The price of a share is thus determined by the supply and demand of the shares. Of course, you want to get in before a company becomes very large or successful. So you often buy the shares at a relatively low price. The better the company is doing, the more your shares will be worth. If you then sell just at the right time, you will benefit the most. But of course you can also do the other way around: if a company is in a bad way, your shares will also be worth less. In this respect, investing in shares is always a (reasoned) guess: nobody knows in advance what the right moment is to buy or sell.
Fortunately, you don’t have to keep an eye on the stock market yourself.
In order to invest yourself, you need to have some knowledge: for example, you need to understand what handy moments are to buy and sell. You also need to have a good idea of what is going on in the financial markets. You have people who really like this game. But there are also plenty of investors who prefer to leave the buying and selling to an expert.
The Advantage of Having Them Invest
Getting your money invested is also called managed investment. So it has the advantage that you only need to invest a little time and attention yourself. The experts invest your money for a fee in, for example, investment funds. These investment funds are composed by the manager of the fund. Such a fund contains, for example, a mix of different shares but also bonds. This spreads part of the risk you run when investing. There are also investment funds that only invest in a certain type of shares, for example only shares in banks.