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Understanding the stock market

ArticleID 111  
Writer Isaac Thuku
Category Personal Article



Stock exchange market is a regulated financial market where securities which can be bonds, notes and shares are brought and sold at prices that are governed by the forces of demand and supply .The Stock market, also known as equity market provides companies with access to capital and on the other hand gives investors shares in the company.


There are two types of stock exchange market, primary and secondary. A Primary market is where new issues are sold first through initial public offering. Corporations, governments and municipalities raise capital by channeling savings of the investors into productive features. The secondary market is where participants include both institutional and independent investors. In secondary exchange market, investors sell their securities to other investors for cash. This reduces the risk of investing and maintaining liquidity in the system.


The stock exchange market is an important part of a country’s economy. Investors who put a lot of money in the stock exchange market make the company benefit from revenues. The rise and fall of market shares offers new investors a chance to buy and sell their shares thus increasing the market value making a lot of profits. The government and the Central Bank monitors the stock exchange market as they get a percentage through taxes.


Before companies can participate and invest in the stocks market, they need to be enlisted first. Companies need to be enlisted by the primary market of the stock exchange in order to issue the shares and get funds for the business. They must invest a certain amount of money as a start up investment in order to buy shares.


Stock exchange markets provide a ready market for investors. At times investors wonder around looking for market shares which are already open. Stock exchange markets which are open attract many investors who fund the business and offer competition to other markets. Having many investors is advantageous because they compete in buying market shares and wait to sell them when the market value increases. Investors can also sell their shares anytime so long as the price is right for them.


The stock exchange market safeguards activities for investors. Investors are given the green light of buying the number of shares they want and also to sell them at whatever price they want. Market shares vary from one business to another. Companies and organizations may decide to set a minimum number of shares to be bought and the least price per share. This means that without fulfilling these conditions, you cannot buy certain market shares.


Many investors have a phobia of starting their businesses as they prefer to invest in other business ventures. This is because they don’t want to risk their money and end up losing it when the business fails. Investors sometimes lose money if the companies whose stocks they hold lose money, stock prices go down or when the investor sells the stocks at a loss. To know the performance of the stock market, one should consult an index of stocks for the whole market or for a segment of the market.


Understanding the stock market
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