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 Will Smithston. Team Wealth Builder Forums, an online
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