How Do Stocks Work? [Ultimate Guide]

According to a Gallup poll, more than 50 percent of Americans own stock. If you’d like to join their ranks, you’re going to need to study up about stock market basics. 

My Disclaimer About Stocks

This post will give you a detailed view of the stock market and how to invest in individual stocks, bonds, and other investments. However, I will go back to my mantra that slow and steady wins the race.

The Basics of Stocks

The first thing to understand is what a stock market actually is. Also known as a share market or equity market, a stock market is actually a collection of markets, or stock exchanges, where participants engage in the buying, selling and issuance of shares of publicly traded companies.

About The Stock Market

The stock market is a dedicated market where buyers and sellers meet, interact and engage in various transactions with one another. Because it involves a massive number of participants, the market assures fair prices as well as pricing transparency – key components of effective trading.

By going public and entering the stock market, a company can raise the money that it needs to keep growing and remain profitable. The stock market facilitates this primarily by allowing companies to sell stocks, or shares, to investors. 

Stocks Allow Companies To Raise Money

Stocks let common investors participate in the financial achievements of companies. The stock market provides a level playing field that allows common investors to enjoy the fruits of public companies’ labor. 

Investors Make Money When A Company Makes Money

Stocks help with capital formation and economic growth for the country. By acting as a platform through which individuals’ investments and savings are channeled into productive investment proposals, the stock market helps to generate more capital for the nation while helping the economy to continue to grow. 

Investing In Stocks Helps Our Economy

Many people don’t realize it, but the stock market actually consists of two types of markets: the primary market and the secondary market. The primary market is the one that lets companies issue and sell shares to the common public for the first time via initial public offerings, or IPOs. 

The Primary Market

The secondary market encompasses the regular trading of stocks and other securities, including exchange-traded funds, or ETFs; commodities; corporate bonds; derivatives based on stocks; currencies; and more. 

The Secondary Market

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