Home Finance Guide to Understanding the Stock Exchange and Start Investing

Guide to Understanding the Stock Exchange and Start Investing

stock exchange

Trading and investing in the stock exchange is no longer a privilege for a select few. Instead, it has become part and parcel of the everyday life of many. With a bit of money to invest and access to a reliable stockbroker, just about anyone can start buying, selling, and holding stocks in their portfolio. But whether everyone can make a profit or not from their investment remains dependent on a host of factors, including their knowledge of stock exchanges, macro and micro-economic aspects, fundamentals of a particular stock, etc. So, if you are planning to start trading or investing, first, you should learn about all the basics of stocks and stock exchanges.

The basic principles of stocks and stock exchanges

Fundamentally, a stock represents the ownership of a fraction of a company or business. It is also known as equity or security of the offering company that the investors can buy or sell. While privately-held companies sell their shares in a unique arrangement, the publicly-traded company allows just about anyone to own a portion via public stock exchanges.

According to meteofinanza.com, a stock exchange is where investors can buy and sell their stocks. In simple terms, it can be compared to a shopping complex or platform where people trade or exchange stocks and other financial instruments. New York Stock Exchange, Tokyo Stock Exchange, Hong Kong Stock Exchange are some of the most prominent stock exchanges in the world. If and when a company is ready to be publicly traded, they have to register with a particular stock exchange following all the rules and guidelines to safeguard investors’ money. Every stock exchange has a list of securities to choose from, where each stock gets a valuation of its own. The stock price depends on various political, financial, economic, supply and demand factors.

In the past, stock exchanges only operated from their physical location to exchange and trade financial instruments. For example, the New York Stock Exchange operates from the offices on Wall Street. However, in light of the advancement of the internet, the top exchanges have now moved online, making them accessible anywhere.

How to start investing in the stock exchanges

As mentioned before, if you have money to spare and want to invest in stocks, you can do so online. But first, you would need to open a trading account with an online stockbroker or your bank if they offer such accounts and facilities. The broker is the middle entity that facilitates a meeting point between the buyers and the sellers via an accessible platform. Once you open an account, you should be able to deposit money and start trading the stocks available to the broker.

Of course, to earn money, you have to buy or sell stocks at a reasonable price point. And to get the best chance of making a profit, investors must get the valuation right, analysing the factors that move stock prices up or down.

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