The Stock Market

In this article we will address the stock market and its various details, to try to better understand how these products work. To better understand the stock market we need to know that in each region/country there is a stock exchange or there can be several, as is the case in the USA, which has, for example, the NYSE and the NASDAQ.

Stock Market

Stock markets can be seen as a store, but instead of selling goods like food or books, they sell fractions of companies, better known as stocks. Within stock markets, the prices of companies vary as they are sold and bought by investors, influenced by expectations, context, monetary policies, and so on.

Companies are not represented by their full name, but by an abbreviation, better known as a ticker symbol. Microsoft is represented by MSFT, or Walt Disney Co. by DIS.

Access

Market access has to be done through brokers and banks, for a fee paid for this mediation service, the so-called commissions, which vary depending on the broker.  

Stock Market Indices

The constant buying and selling by investors make stock prices fluctuate and sometimes end up reflecting the health of the respective stock exchange because as we have already mentioned the market is organized in groups according to country or region. For example, the SP500 represents the top 500 companies in the stock market, the PSI-20 represents the 20 largest companies listed on Euronext Lisbon. They can also represent specific sectors of the stock market, such as the technology or industrial sector.

Many investors use indices as a measurement tool. In general, the SP500 is the most widely used since it represents most of the world’s largest companies.

Trends

The market, from a long-term point of view, moves through trends.

  • Bull markets – periods of confidence with good signs of economic growth;
  • Bear markets – we can see times of uncertainty and fear, translated into a slowdown in investment reaction;
Green arrow – Bull market / Red arrowBear market

These trends can be easily recognized by analogy with the way a Bull attacks (from the bottom up) or a Bear (a strong stomp from the top-down).

Fortunately, Bull market periods are longer-lasting, which makes stocks a good investment because the general long-term trend is upward.

Summary

These are the necessary characteristics that an investor in his initial phase of searching for knowledge:

  • The stock market consists of several stock markets, where each stock market belongs to a particular region/country
  • These markets are where you buy and sell shares through a brokerage company that serves as an intermediary
  • Each stock exchange has an index that works as a measurement of that specific stock exchange. Or in the case of the SP500 some use it as a measure of the world market.
  • The market moves by trends, either up or down, but in the long term, the general trend is upwards in value.

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