What Stocks Are and How Stock Market Investments Work
People hear about the stock market every day. Each time the
stock market hits a high, or a low, people hear about them.
Daily statements are also issued about the activities of the
stock market and its relevant economic implications. But what
really is a stock market? What are stocks? And why is it that
people want to do stock market investments?
The stock market is the marketplace where the trading of company
stocks happen. These stocks may either be the securities which
are listed on the stock exchange or those which are traded in a
private manner. Stock market investments allow companies and
private individuals to get a share of ownership in large
corporations. It is also a way of gathering large sums of
investment capital which is difficult to produce if the business
is solely-owned. The large capital then comes from the stock
market investments.
Stocks are shares of a company or business which gets on sale in
the stock market. Stock market investment happens when a person
buys a share of a company's stocks that were put on sale in the
stock market. For example, a businessman decides to sell his
business in the stock market. Each stock market investment is
represented by the person who buys his share of stocks. When
this happens, any person who buys stocks in the businessman's
company will have an equal share of profits by the end of the
year, and an equal vote in the company's business decisions.
In the past, stock market investments were done by individual
buyers and sellers. Through time, however, this has changed and
the market participants evolved from individual investors to
large corporations. This change in the activities of stock
market investment has also helped to control movements in the
market.
To encourage stock market investments, a business that wishes to
sell its stocks to individuals and corporations could only do so
if it becomes a corporation. Individual capital investors and
big corporations who buy a number of shares of a business or a
corporation are then called shareholders. Shareholders are the
owners of the new incorporated business. Their stock market
investments gave them the authority to claim ownership of the
business. These people can now decide whether to privately or
publicly hold their corporation.
In a privately held company, the shareholders are few and
probably know one another. Their stock market investments are
known to each other. The publicly held company, however, is
owned by a large number of people who do stock market
investments on the public stock exchange.