What is the ‘Stock Market’
The stock market refers to the collection of markets and exchanges where the issuing and trading of equities (stocks of publicly held companies), bonds and other sorts of securities takes place, either through formal exchanges or over-the-counter markets. Also known as the equity market, the stock market is one of the most vital components of a free-market economy, as it provides companies with access to capital in exchange for giving investors a slice of ownership.
How Does the Stock Market Work?
The stock market can be split into two main sections: the primary market and the secondary market. The primary market is where new issues are first sold through initial public offerings (IPOs). Institutional investors typically purchase most of these shares from investment banks; the worth of the company “going public” and the amount of shares being issued determine the opening stock price of the IPO. All subsequent trading goes on in the secondary market, where participants include both institutional and individual investors. (A company uses money raised from its IPO to grow, but once its stock starts trading, it does not receive funds from the buying and selling of its shares).
Stocks of larger companies are usually traded through exchanges, entities that bring together buyers and sellers in an organized manner where stocks are listed and traded (although today, most stock market trades are executed electronically, and even the stocks themselves are almost always held in electronic form, not as physical certificates). Such exchanges exist in major cities all over the world, including London and Tokyo. (Investopedia)
Let’s visit some of the instruments in the market. 3 STEPS IN ENGAGING THE MARKET
STEP 1: Which Country have the most potential upside and why?
Always understand the risk involves when you start to invest in stocks; country risk there are many and just to name few; Political Risk external & internal, War, Inflation and etc.
Is it safe to trade – in terms of safety of money, tax and what about corruption related issues.
What about Stock Trading?
Two general types of securities are most frequently traded on stock markets: over-the-counter (OTC) and listed securities. Listed securities are those stocks traded on exchanges. These securities need to meet the reporting regulations of the SEC as well as the requirements of the exchanges on which they are listed.
STEP 2: Which Sector do you want to focus and why?
Fundamental understanding of the sector is a critical factor before you decide to trade; projection of potential upside of each sector will be a plus point for you as a trader before you start investing. Then choosing the right company with good potential earnings, dividends potential and good corporate governance will give you added advantage to your potential earnings in the market.
STEP 3: Understand the Futures Market will give added knowledge in investing.
Futures are interesting they are our leading indicators in terms of potential sector that the market is focusing in terms of volume and volatility.
Trading the market for us is all about Value Investing – Taking our time and being patient to see where the market is gong and watching the thematic movement of each instruments.
Investing in the stock market is not for the rich but for those who wants to invest in a company that has a potential growth in 5 – 10 or more years.
High Risk Investment Warning:
Please note that Stocks & Shares carry risk and trading involves significant risk of loss, It is not suitable for all investors and you should make sure you understand the risks involved, it is recommended that you seek an independent advice, if necessary.