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What is the Stock market? In simple terms it is place where you buy and sell stocks and shares. It is where the trading in securities is managed. It has become a major driver to the market economy as it provides business access to investors and their capitol. The investors risk their capitol for the chance of profit based on the future performance of the companies they invest in. In the USA there are 3 central stock markets some times called stock exchanges. The NASDAQ stock market, which was created in 1971, was the first electronic stock market in the world. NASDAQ stands for, National Association Of Security Dealers Automated Quotation and is located through a telecommunications network. In other words there is not an actual physical place where you are able to see NASDAQ because it's connected electronically to the companies it represents. The NYSE or New York Stock Exchange; unlike the NASDAQ they use floor traders to make the trades. It is managed by a group of directors who are responsible for the conduct of their members; overseeing and setting the procedures and policies of the NYSE. The AMEX stock market, which stands for American Stock Exchange, is the third largest stock exchange based on its trading volume in the United States. AMEX handles 10% of the securities that are traded in the United States. The stock market also issues and trades stocks and shares through OTC, over the counter markets, also known as the equity market. The OTC markets most commonly list small companies and their stocks. Companies that have been dropped by the NASDAQ stock market due to instability within the company and their stocks can often be found at the OTC markets. There are two OTC markets; the first is the OTCBB, which stands for Over The Counter Bulletin Board and Pink Sheets. These markets give the opportunity to investors to own shares in publicly traded companies. They provide 2 ways to profit from the markets; through dividends or capitol gains. Capital gain means that there is an increase in the companies' capital assets, such as an increase in their real estate value or an investment they have made. Thus in return gives them a higher worth than their original purchase price within the stock market. This will make the value of each share increase including the share or shares that you have bought. Dividends are the distribution of a portion of a company's earnings. A company's board of directors decides what class of its shareholders will reap the benefits of their profit. A dividend in the stock market can be in the form of cash, property or stock. Being a shareholder you become one of the many owners of a company. This gives you the right to a claim on all the company owns. You are entitled to a share in the company profits as well as the right to vote dependant if the stocks you have purchased through the stack market have voting rights included. The more stocks you own the more of the company you own and the more you can earn from the companies earnings. There are two types of shares that you can purchase from a company through the stock market. The first is the common share and the second is the preferred share. The common share, also known as a common stock is at the bottom of a company's priority ladder. If the company your invested in through the stock market becomes bankrupt or needs to liquidate their assets, you will not receive any money for your stock until the creditors and preferred shareholders receive theirs. However if you purchase a preferred share through the stock market, also known as a preferred stock, you have top priority to receive money if a company becomes bankrupt or has to liquidate its assets. The downfall to buying a preferred stock through the stock market is that you will not be given any voting rights to a company, which means that you have no say in how the company may conduct business. Trying to understand the stock market appears to be extremely difficult and yes it does take some time to understand. If you break the aspects of the stock market down into sections and study them one at a time you just may find its not as complicated as it may seem. The stock market can be complicated but if you're a beginner just take it one step at a time it really isn't as difficult as it appears.
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