Basics of the Stock Market

In this guide we will examine the critical characteristics of the stock exchange. Stocks are traded either on an exchange (a physical location) or over the counter (OTC) between agents through computers. Shares of smaller companies, many bonds, and also mutual funds are typically traded OTC. Normally the shares of larger companies are traded on stock exchanges. The largest and most well known stock market is the New York Stock Exchange (www.nyse.com). Many countries throughout the world possess their own stock trades.

Stocks and bonds are bought and sold through agents who get a commission on each securities transaction. The stock and bond markets are heavily regulated. From the U.S. the main securities regulator is your U.S. Securities & Exchange Commission (www.sec.gov).

Another important topic to get an understanding of the stock market is learning about the Dow. You might have heard the phrase "How did the market do today?" The "marketplace" in this context is usually with regard to this Dow Jones Industrial Average and is well known only as "The "Dow. So what is the Dow? It is an index (group of shares) reflecting the worth of the 30 largest public companies in the U.S., including IBM, Exxon Mobil, etc.. The Dow was made by Charles Dow and Edward Jones several ages back. It behaves like a barometer of the state of the economy. The Dow (and also the value of stocks) are influenced by investors' psychological variables (for example, investor confidence), economic and political events, wars, and disasters.

There are different indexes aside from the Dow. Examples would be the Standard & Poors ("S&P 500), Russell 2000, NYSE Composite, etc.. Are there so many? The indexes are groups of stocks which behave as performance benchmarks for cash managers, like those who manage mutual funds. Mutual funds may have portfolios of large company stocks, small company stocks or even a combination. If a mutual fund's investment objective is to invest in smaller sized businesses, the fund manager wouldn't use the Dow as a benchmark but another index, since the Dow is an index of large company stocks.

06.05.2018 22:09:41
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