We have all heard of the stock exchange and probably have a general idea about what it is and the way it works from high school economics courses, tv financial reports, as well as the countless film depictions of what happens on the floor of the New York Stock Exchange. But how does it really work and what’s meant by”playing the stock exchange?”
The Stock Market in a Nutshell
Businesses sell shares of stock as a method of raising capital. By way of instance, let us say that the XYZ corporation, makers of the best whatsidoos and thingamabobs in the nation, wants to open a new factory. Doing this will require a hundred thousand bucks. The business can find financing from a bank, but it would end up in debt. So, rather than borrowing, it decides to give additional shares of stock. As investors buy the stock they’re giving the company the capital it needs to do business. In return the stockholders actually have a part of the organization and have some say in its own actions. If XYZ does well in the thingamabob market, its stock will increase in value as more people will want a part of XYZ for themselves. If it does not do this well (maybe it gets undersold from the Ichi Nee firm, a Japanese conglomerate that has discovered a way to make smaller, cheaper thingamabobs), less investors will purchase the stock, present stockholders might attempt to market, and the value of the stock drops. The purchase price of individual stocks will rise and fall a few times daily. The purchase price for some inventory you will see on the evening news for any specific company represents where the inventory was valued at the close of the business day. Additionally, it will tell you whether that cost rose or dropped in the previous day. It can be sufficient to make an investor tear out his hair. Didn’t you ever wonder why almost all economists are bald?
“Playing” the Stock Exchange
You might have heard people refer to”playing” the stock exchange like it were all a big game of Monopoly. This is a decent term because that is exactly what some people do, but the game is much more like Roulette – occasionally of the Russian selection. Individuals who”play” the industry typically invest for short intervals in the hopes to get a fast return. They’ll purchase some stock, wait fro the price to go up, then sell immediately and invest in a different inventory and await the next gain. They may do this several times every day in some instances as prices vary. This may be a very risky approach to behave because plenty of money may be lost, but a lot can be earned as well.