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Introduction.
Discovering the stock market for the very first time may be
a blissful experience. Promises of quick gains and an unrivaled
fortune have attracted masses of investors since the dawn of time.
Since then, fortunes have both been made and lost. In fact
majority of investors in the market lose. The unsurpassed
are those who empower themselves with knowledge in the business;
knowledge is power. As Benjamin Franklin
had once said, “An investment in knowledge always pays the best
interest”.
The
stock market is primarily based on the concept of buying and
selling securities. It is a vehicle where corporations are
publicly traded. More specifically, these companies are listed on
a stock exchange. Their intention
in being listed as a publicly traded corporation is access to an
inexpensive source of capital. Capital, or money that a company raises in the
market, is meant to be reinvested back into the company to further
growth by funding various projects and/or covering associated
expenses. The stock market creates an ideal opportunity for a
corporation to find the financing they need as opposed to a
bank loan that comes with high interest rates. In theory, as one
purchases shares of any given company in the stock market, they
are acquiring a certain stake or ownership in that company.
Historically, investors physically attended the Stock Exchange in
order to purchase shares in any given company. Modern-day
sophistication allows for the trading process to occur online
where an investor may buy and sell shares in a security directly
through a stock broker, otherwise known as a
broker-dealer.
As most large corporations worldwide are listed on stock exchanges,
the market has become an important indication of welfare in the
economy. For instance, if the New York Stock Exchange (NYSE),
the highest stock exchange in the United States, is in a declining
trend, chances are the economy is struggling or declining as well.
A market in an inclining trend is considered to be a bull
market. Similarly a market in a declining trend is known as a
bear market.
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