Stock Markets & Indexes

May 7th 2016

Overview

A stock market is a place where stocks, bonds, or other securities are bought and sold. A stock market can be a physical place referred to as a "stock exchange," where stockbrokers gather to buy and sell stocks and other securities according to fixed regulations. This term also includes e-trading because transactions in many stock markets around the globe are handled over the computer and telephone lines. Indexes are standards that represent the value of stocks in a market, particularly a figure such as the Dow Jones Industrial Average. They measure the fluctuation in the prices of stocks, bonds, and some commodities markets in terms of market prices.

How It Works

Every major economy has a stock market with a stock-price index, which basically indicates how well the companies that are listed on the stock market are performing. Stock markets work like any other marketplace. It is driven by the two factors: demand and supply.

Benefits

A stock market offers an investor a host of options. It is possible to generate quick money as well as derive long term benefits. The risk is high, but the fact remains that many investors have made big bucks whenever the markets have performed in their favor. Trading markets have high potential and the reward isn't dependant on time. Investment in the shares of "blue chip" companies like Coca-Cola is normally seen as a secure investment because their shares guarantee steady investment. Stock indexes indicate the economic health of a particular industry, stock exchange, or nation. Many indices are used to benchmark the performance of portfolios. Financial experts believe that stock markets will climb faster than any other form of investment in times to come.

Cost/Pricing

Cost of the stocks will vary on the price that the company has decided to list its stocks. However, the prices of shares can go up and down depending on the condition of the market, economy, trading trends, and financial factors of the company. For instance, if the company is doing well, its shares will be expensive, otherwise, cheap. This will affect the price that an investor pays for purchasing the shares at a point of time.

Timing

Since the price of the stocks change according to the market conditions, the time when stocks are purchased is absolutely vital to be successful with the stock market and indexes. If markets crash unexpectedly at the time of investment, a trader can lose all his money. A professional trader tries to make money by buying shares when the prices are low and selling them when they become high. They trade shares on the stock exchange based on how well they are doing in the stock market at that point of time.

Companies/Industries

There are an array of companies that allow the public to subscribe to their share capital. When you invest in stocks, you are actually gaining a share in the capital of a particular company through the stock market process. Forbes recently published a ranking of America's Best Big Companies. This can be a good source to start researching which companies would produce the biggest investment opportunities. CNN Money also came up with a 2009 Top 40 Best Stocks to Retire On where Abbott Laboratories ranked number one.

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