subject: Stock Market - Understanding Stock Market Basics [print this page] Have you listened to your coworkers or friends talk about their experiences with buying and trading stocks and been totally confused? Do you sometimes wonder what it means when people say stocks have gone up or down, but have never really had the time to research it for yourself? Many people have a mental image of what the stock market looks like, but really don't understand any of the processes or terminology that surrounds it. Although there are many complicated theories about why the market does what it does, the basic concepts that fuel it can be explained and understood quite quickly. Here are some of the basics about stocks and the market.
The first thing that you have to understand about the stock market is that not all companies are listed on it, nor do they want to be. There are many different reasons why a company would want to be listed on the big boards; however, there are both advantages and disadvantages to being a public company. When a business goes public, it is usually because they are eager to grow, but don't have the funds to do so. Instead of going to the bank for another expensive loan that they will have to eventually pay back, these companies open themselves up for public trading, and accept investments from people who think that the company has a chance of doing well and providing them with some of the profits.
Another reason that so many people are attracted to the stock market is that they are interested in being able to say that they are a partial owner in a large corporation. As a shareholder, which is what you call the people who own the stocks, the individuals that have invested in a particular company will be able to cast their vote on most of the big decisions that the company makes, and if the company is successful, they stand to gain a portion of the profits through dividends.
One of the most confusing things about the stock market is what the news reporters mean when they say that stock has gone up or down. As a company becomes more successful, it tends to increase the value of that company's stock. The logic for this is that the more successful a company is, the better the chances are that the shareholders will see some of the profit. This makes the stock more desirable, and drives up the price.
