Stock market is basically a market where the activity of regular buying and selling of stocks take place. These stocks are nothings but shares that act as a financial evidence which depicts the extent of the ownership in a company or any corporation. With the help of the stock’s value one gets to claim on their proportionate assets which are owned by them and their earning which are basically generated as a profit. So in general stocks tell about the ownership of a stakeholder in a particular company.
Thus stock market involves financial activities which are conducted in the market that involves trading of the stocks. Now although there are risk in stock market, but if one approaches it in the right manner, it becomes one of the best ways to build up an individual’s net worth. Most of the rich an affluent people are indulged in stock marketing by making investments of their majority of wealth in stocks.
How does it work?
Stock market is a well managed and controlled environment where one gets to trade various kinds of securities in a much secure and regulated way. Now the stock market involves thousands of stakeholders who are willing to buy or sell some of their shares. This is done under fair pricing system and the whole transaction is made transparent for the people involved. Now a day’s stock markets are operated through computer and hence it has become even easier to remain updated with the current scenario of the market.
Now what happens in a stock market is that the various companies that are participating in this are allowed to sell their shares to the public by the process of ‘initial public offerings (IPO)’. Thus once the investors invest the margin of the capital of the company raises. This means that the companies divide their shares in to two categories one being dedicated to the common public to whom the shares have been sold and one being reserved for the company which hold greater amount. And if everything works according to the plan which means that there is no recession or depreciation going on then the company manages to make a lot of profit out of it. This in turn leads to an increment in the value of the shares of the stakeholders. Now it depends upon the stake holders whether they want to hold the shares for some longer duration of time in the hope of the rise in share prices or they may sell it quickly. Again the stock market here acts as a great help for the raising of the capital. Then in turn it receives a desired amount of fees from the respective company also from its financial partners. And in this way the stock market works.
There are also other facilities that the stock market provides like secured trading platforms where a regular buying and selling of stocks can take place. In turn they earn some money for every trade that takes place on that platform. With that they also ensure things like transparency in prices, liquidity and discovery.
Thus since stock market provide a very secure and well managed platform for investments and trading, it is one of the great options to increase the net worth of an individual’s assets.