Stockmarket?

[ChaosControl]

This might sound dumb to some of you but I have no idea how the stockmarket works.
well its something like;
you buy some stocks and then?
how many stocks can you buy?
why a stock market?

anyone care to explain?

 

[Darkness]

Well... as I understand it (which probably isn't very well)

The stock market is a market for shares in certain publicly owned company.
The company has an IPO to go from private to public in which they sell off a share of the company to investors. This generates a great deal of profit for the private owners who, generally, maintain a majority of shares in the company and retain control.

The market for stocks works pretty much like any other market. That is, it obeys the laws of supply and demand. People buy stocks that they identify was strong performers in the market. If they are correct, the demand for share in the particular company will rise and the value of the stock will go up accordingly due to the scarcity of available stock. If they are wrong, the demand for the stock will fall, resulting in a devaluation of the stock.

The demand for stock in largely determined by quarterly earnings reports, and current events. If the firm reports strong profits, demand for a share in that company will rise.

you buy some stocks and then?
You wait.

how many stocks can you buy?
As many as are being sold.

why a stock market?
Because a publicly held firm has much greater potential than a private one (in general). And the market is the natural way to organize activity.

Hope that helps.

 

[Kashmir]

This is, what i understand of it from marketing course at uni.

Stock are tangable objects, such as iron ore & coal. If you buy stock what you are really buying is loads of some item sitting in storage someware. So playing the stock market is EXTREMELY risky & complicated... after you've bought stock you do not sit around waiting for them to increase in value, you sell it as SOON as possible. Selling your stock to someone willing to pay a little extra than what you purchase it for is not good enough... you need to take into consideration their location, how much is it going to take to ship it their, trade policies, embargo's & stuff like that and of coarse the location of your stock.

Think of the stockmarket as a B2B version of ebay, a much more complicated version of ebay... & in fact there are other on-line auctions that are restricted to businesses alone, for trading stuff like hardware, office supplies and so on...

Shares on the other hand are when you buy part ownership of a business, only a very small part, as whoever has 51% gains control over the company and can basically direct it as they see fit. when you buy shares the company will offer a negotiable percentage & price to a limited number of people... the company can charge whatever they like for the percentage but as long as the buyer is willing to risk that amount. After you've bought shares you just sit around and wait, as the company increases in size & profit so does the return of your shares e.g. if you invested $100 and the company increased by 10% your now $10 richer if you pull your shares out of the company.

however there is a huge risk with shares, when you buy shares the company is free to do what it likes with that money... if they spend it, then the business goes broke & files for bankruptcy the chances of you getting that money back is zilch, also another thing to watch out for is people selling shares to companies that they don't own or don't actually have the shares to sell you and various other schemes to basically screw you over.

why a stock market?

why a fish market? ... pretty self explainatory. one sells fish while one sells stock. The most obvious example of stock is cattle. The current droughts in aus have made their stock worthless, you can pretty much buy a few hundred cows for $50 possibly cheaper... the problem is having somewhere to put them & how many of them may need to be put down.

To me stocks & shares are something that only the rich have the money to risk on.

 

[Jari]

Stock = shares, in this case.

Stock as in stock would be traded on commodities markets - I believe that private traders are fairly rare there.

Darkness' explanation was a pretty good one, except that I would like to point out that the primary purpose of IPO is to generate capital for the company, and not direct profit to the owners.

 

[RW_66]

The Stock Market and corporations (they are intertwined), are 2 of the fundementals of modern business. Both allow the movement and strategzation of large investments that allow quicker investment and utilization of funds as needed by large corporations.

Basically, stock shares are a type of 'promisorry' note. The purchase gives you a theoritical piece of the company, along with a vote in some company decisions (Like CEO's and other top corporation officials, whether to sell or buy other businesses, etc.), with one vote for each share of stock you own. In return, the company returns a portion of it's profits (set by corporate guidelines) back to the stock holders on a quarterly, and annual basis. This is known as the 'dividend'. Again, the more shares you own, the more you get back (overall).

Okay, now what companies are doing when they sell stock shares is offering public shares of future profits, for present investments Publlically traded stock shares help companies raise large sums of cash for needed investments in short time fashion, without the nessesity of getting a loan from a bank and paying interest on a schedule. However, stocks may also be 'private', ie. held only by a limited number of individuals and not publically traded. The stockboard, which is elected by the shareholders, is the only body which the corporation has to answer to in spending and investment matters.

The stock markets (NYSE, NASDEQ,S&P 500) are "futures" markets, where public stocks are bought and sold. The price the shares are sold at is based on many variables, such as: public demand, company profits, company worth, short-term and long-term goals and projections, management structure,etc. While the stock shares and dividends are 'real', the stock market itself is mostly psychological in nature. Prices rise and fall depending on where investors and professionals see the company/companies going. Money can be made both long-term and short-term through the purchase and selling of stocks. The call "buy low, sell high" has driven the stock market since it's inception.

 

[Kashmir]

On a sort-of/but-not-really money related humerous side note, i have some how managed to make 40000 gold by selling alcoholic apple pie's & pet dog ribs since i installed it the other day. LoL.