A marketplace where company stocks and derivatives are traded is called a Stock Market. Such securities are listed on the stock exchange and can also be traded privately. The stock market also trades in commodities (gold, silver and other metals as well as grains etc. ) and such type of stock markets are called Commodity Markets. Whereas, a stock market that where bonds are traded is termed as a Bond market Initially companies list themselves on the stock exchange to raise capital Cap, here stands for capital. Therefore a range of stocks and securities of companies are traded in a stock exchange. These companies may be large cap, mid cap and small cap companies.
Stock market participants during early history were usually big businessmen or families who were associated with big organisations. Over the years stock markets actually have “institutional investors” , like banks, insurance companies, mutual fund organisations etc. participating in a big way and making investments and trading, a part of their client’s transactions. Many more xommon men also have affected the market these days.
Economic importance of stock markets
Stock markets have always been a quick way of making money and creating liquidity for the investors. Investors too are keen to invest in Initial Public Offers ( IPOs)as these investments tend to generate income through appreciation in a long run. As far as normal investors are concerned quick liquidity to their investments and multiplication of money are the chief attractions. Moreover they are an attractive place for aorporates to raise money from. Organisations that are looking for expansion and diversification sprees have been rushing into these markets to raise their authorized capital.
However, the risk involved is to be kept in mind and that’s where the role of expert technical analysts and brokerage houses steps in. Investors can seek guidance from these experts and look at stock trading with new confidence. Besides this, the volatility of the stock markets generally proves to be a matter of concern for the economy. The market may also undergo crash downs due to economic news and rumors generated by various sections of the media and bring in short term volatility and loss. The government authorities that command market operations step in at such times and make efforts to remove the element of panic and risk amongst investors.
The government has another role in the markets too. It puts a particular amount of tax on each of the transactions and money is thus collected for public utility and welfare which is further allocated in the budget for various sectors. Thus the smooth functioning of the stock markets can help in smooth functioning of the economy.
Essentials for stock market investorsbeginers:
1. Permanent Account Number(PAN) card.
2. Address proof.
3. Age and date of birth proof.
4. Tax returns and income sources.
These are the usual requirements.
Portfolio for investors
Mutual funds, real estate, commodities (gold, silver, grains etc. ) can be a part of an investors portfolio. An investor investing in real estate has the capacity to generate huge money from its trading. Mutual funds however, are a preference amongst small and medium size market investors as they have a chance of diluting risk amongst many stocks, thus creating a balance.
Written by Jesus Smithston. Team Wealth Builder Forums, an online community of people looking for financial freedom. All information about recommended books, links to income generating opportunities available. Register for free at TeamWealthBuilder and get to know about the income