Stocks are bought and sold at the public or private stock market where the stocks and derivatives of companies are traded at an agreed price. Before you move on to stock transactions, it is a good idea to take a look at some stock market terms commonly used during trading.
What are Stocks and Shares?
A stock is simply a portion or percentage of the share of ownership in a certain company. Business entities need to obtain funding in order to grow, expand, and introduce innovative products. The growth of a company is possible if more funds are coming from the stock buyers. Businesses sell a part of the ownership to buyers in the form of stocks sold at the stock markets. An individual stock is referred to as a share.
What are Assets and Dividends?
Companies own certain valuable resources and property. These are called the company’s assets, with each asset being worth a certain amount of money. Assets also determine the financial standing or the value of the company.
Once the company registers profits, they are distributed among the stockholders who own a percentage of the ownership. The profit due to every individual stockholder is called a dividend. Dividends come in a variety of forms – money, property, or stock.
Market prices determine whether the market is considered a bear market or a bull market. It is referred to as a bear market when prices on the stock market are low and the market is depreciating. When stock market prices are rising, so does the market itself. At this point, the market turns into a bull market.
How Stock Market Transactions Are Carried Out
Transactions on the stock market are carried out by professional and licensed stock brokers. These individuals work as middlemen between the buyers and sellers. If a person wants to invest money in stocks, he or she approaches a broker in order to place his or her orders. Since most brokers buy and sell extremely large volumes of stocks, they usually co-operate with sub-brokers who work with individual investors. These brokers earn a commission every time a transaction is carried out. The sub-brokers also find buyers for companies that want to sell stocks. Businesses contact the brokers when they want to sell stocks, and the brokers have to find promising buyers.
Stock Exchange and Online Stock Trading
Stock trading can be carried out even without a broker. This is possible with the help of stock exchange services which give investors access to stocks worldwide, allowing them to make transactions in the absence of a broker.
Another way of trading stocks without a broker is to create a trading account online and make transactions from any location where access to Internet is available. There are several online stock trading companies that allow buyers and sellers to establish a stock trading portfolio. Obviously, trading accounts allow prospective buyers and sellers to trade stocks with ease.