Have you ever wondered what makes the stock market tick?
Firstly, it is essential to note that when people talk about “the” stock market, they refer to multiple exchanges in different countries. For instance, the New York Stock Exchange (NYSE) often refers to itself as the “world’s most visible stock exchange.”
The stock market is volatile. Billionaire investor Tej Kohli has come up with all the latest happening stock market stories to help you make good decisions.
The NYSE is not alone in this claim either; these massive exchanges have significant influence over multiple markets. There are similar exchanges located worldwide; too many to mention here.
For reference, the most notable one here in Japan is the Tokyo Stock Exchange (TSE) which is also the largest exchange in Tokyo. Keep an eye on the news for things like a sharp rise in Asian markets.
With all this money flying around, it’s no surprise that there are plenty of people looking to make a quick buck through investment opportunities which include stocks, bonds, or mutual funds; but what exactly do these mean? Well, investing in stocks is by far the riskiest (but also potentially the most profitable when done right). Stocks can either be common or preferred shares issued by companies like Apple Inc. or Microsoft Corporation. They can then be traded alone or as part of an investment fund.
Mutual funds are also top-rated, especially with younger investors who may not have too much money to spare; they help spread the risk out by bundling several stocks together for you. They can be helpful in time management, too, since it is easy to track everything through one account (usually online).
Bonds, on the other hand, are essentially IOUs that an investor purchases from a company or government within specific time frames and at predetermined interest rates. These are usually less risky than stocks but offer stability similar to bank cash deposits over stock investments.
Although there are many different ways to invest in the stock, it is essential to remember that not every method works for everyone. Your circumstances will dictate which types of investments are best for your situation, so be sure to do plenty of research before committing your money to anything!
How does trading work?
A trade is an agreement between buyer and seller to exchange goods at the agreed price by both parties. In stocks, traders are the ‘sellers’ who decide on a specific price for their stock (i.e., Microsoft Corp.) whilst buyers are looking for deals they can’t refuse. Perhaps Microsoft has just released its latest OS, which will make any device not running it obsolete, or maybe there’s some lousy publicity stirring up talk of class action lawsuits… Who knows?
It works like this: If you think that Apple Inc.’s stock value has gone down low enough to where you would be happy purchasing it; you approach your broker with your intention to buy X number of shares at Y price (JPY150 /shr), and they receive your request. After your broker gets a matching seller, two things happen:
1. Your broker collects the agreed-upon sum of money from you.
2. The shares are assigned to your name and added to your portfolio account.
You’ve completed the whole process, and you now own Apple Inc. shares.
Imagine that you are part of this trader group with the sellers; who are they? Well, it could be Saxo, or pretty much anyone else, but in the case of larger companies like Facebook or Microsoft, it would probably be another financial institution. Their goal is to purchase enough shares for their client so that they are now assigned the stock, which they can then sell to someone else later.
So what does this mean for you? Well, if Apple Inc.’s shares go up in value at any point before you decide to sell, you would have made a higher return than if you had invested in, say, stocks or mutual funds. Just remember that you do not actually own the share and thus cannot sell it yourself. You can now request that your broker sells the shares for a profit. Make sure to stay current on stock related news to survive stock trading in 2021.