The Stock Market
Stocks are units of ownership in a company. People may buy stocks in many different types of companies. It is called investing. Their hope is that sometime in the future the company may make more money. The stocks would then be worth more money. The stock owner can then sell his stocks at a higher price than he purchased them for.
Companies sell stocks or units of their companies for different reasons. They might want to expand their company and need money to hire more employees. They might need to build a new plant or other building. They might want money to use for research and development of new products or update the old ones. Without investors, those companies probably couldn't grow.
A person who purchases stocks is called a shareholder. He owns a share of the company. If the value of the company's stocks goes up, a person makes a profit. If the value goes down, the shareholder may own stocks worth less than the amount he originally paid. He will have lost money if he decides to sell at that time. Sometimes a person holds onto stocks which have gone down in value to see if the value goes up.
The stock market is like a store for stocks. People can buy and sell shares in a company. They do research and find out how much stocks in a certain company sell for. Also, they try to find out if the company has been continually making money over the last number of years. The purchaser decides how much money he wants to invest and in what company he wants to be a shareholder. The headquarters of the Stock Market in the United States is in New York City. It is often called 'Wall Street' because that is the name of the main street in the financial district of that city.
People who are wise do not invest all their money buying shares in just one company. If an investor has shares in many different companies, he will be able to keep going even if some companies lose money for a short time. He might make a profit on the other companies.
Many people study the stock market constantly. They spend all their time watching the prices of stocks go up and down. Financial advisors earn their living helping people choose stocks to invest in. If they have enough experience, they can tell what stocks might be worth more money in the future. The purchaser pays a fee to the advisor or to the company which owns the stocks. Investing in the stock market always involves a risk to the buyer. Not many stocks stay high all the time.
All companies do not sell stock. Companies run by a single person or a group of people cannot sell shares in their companies. A company which is a corporation is the only type legally allowed to sell stock.
Each shareholder in a company has the right to vote on certain issues which come up. Those who own more shares, of course, will have more say in the outcome of the vote. Most companies have an annual meeting where investors cast ballots. Those who cannot attend can send their decision in by mail.
The terms 'Bear' and 'Bull' are used in describing those who invest in stocks. A 'bearish' person will proceed cautiously in buying stocks because he is concerned that the market might be going down.A 'bullish' person thinks that the market is going to go up in value and buys a lot of that stock. A 'bear' market describes a time when stock prices have been going down. A 'bull' market is one that is seen to be going up.
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