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Stock Market Basics A Beginner's Guide

Aug 22, 2008
Once you have decided that you need to invest your money to get some decent returns on it, people will usually suggest you that stock markets is the best way to earn money. But you need to know first what are markets and how to invest in them.

The answer lies in two terms that make stock markets that is stock and markets. In the common man language, shares is what you own as part of the company even though that portion which you own may not be enough to have a say in the running of the company. Market is where you trade something and the buyer of an item meets the seller of the item. In this case the stock market is where the seller of the share of a particular company meets the buyer.

The stock markets are very much like the other markets which have a common set of rules governing the trade and these markets also have a common set of terms and terminology which are used by the people. In today's world the stock markets also represent the health of the economy as the economy is made up of people who buy stuff from these companies. If we buy more then the health of the company is good which in turn reflects in the price of the share on the exchange. If overall the prices of shares are going up then it suggests that the health of the economy is very good.

Share markets have come to be synonymous with exchanges which in actuality is what is the stock market and the exchange of stocks takes place here with all the orders from people willing to buy or sell the shares coming here. The exchanges are regulated by a regulatory body known as Stock Exchange Commission or the SEC. The SEC makes sure that a few large players do not make abnormal profits by wrongful means and deny the small investors their share of the profits.

The markets also have their own set of rules as to what kind of share can be traded where. For example the shares of small companies which are not eligible for trading on the New York Stock Exchange or the NASDAQ are either traded on the American Stock Exchange or the OTCBB.

Stock markets have their set of rules as to how and when you pay money when you buy shares and vice versa for selling shares. It also has rules about how the ownership gets transferred to an individual from the person he buys the shares.

This is how and what of the stock markets for the uninitiated and it will hopefully help you understand the dynamics better.
About the Author
Amit has applied stock market basics for understanding and making money in the stock markets. He also has a comprehensive stock market basics tutorial on his website.
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