The Stock Market In Brief

16:36 Mon 24th May 2010 |

How many of us have heard of the stock market but are not actually sure what goes on there? We may often see the figures on the news each day. Sometimes they are up and sometimes they are down.

The stock market is very important to the global economy, but some may not understand its ins and outs. A traditional meaning of the stock market is:
‘A public market for the trading of company stock at an agreed price’

It is the term generally used to describe the various financial markets around the world, with the UK's main market being the London Stock Exchange. Other well known markets are New York Stock Exchange (NYSE), Tokyo Stock Exchange, Paris Bourse and Deutsche Borse.

Here, shares in public limited companies (this is the stock) are bought and sold by brokers – the middlemen – on a daily basis. Participants in the stock market range from small individual stock investors to large hedge fund investors, who can be based anywhere in the world, not necessarily in the country where the trading is taking place.

Public limited companies are the only types of organisations available to invest in – private limited companies usually require a more personal arrangement.
Individuals tend to use the FTSE – or Financial Times and the Stock Exchange - to gauge the performance of the biggest 100 listed firms in the UK. They can then ascertain what stocks and companies it might be worth investing in.

A transaction can usually be completed in one of two ways – buying individual shares through a broker or indirectly investing through a ‘funds manager’. The latter is where a number of investments are joined together to gain control of a company.

Actual trades are based on an auction market model where a potential buyer bids a specific price for a stock and a potential seller asks a specific price for the stock. When the bid and ask prices match sales takes place on a first come first served basis when there are multiple bidders or sellers.

Before embarking on this type of investment, it is important to gain guidance from a financial advisor.

If you want to know more about the stock market why not ask AnswerBank Business and Finance.

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