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What Is A Stock Market – A Beginners Guide


Brought to you by http://www.HowToInvestInShares.co.uk – the subject of this video is: What Is A Stock Market?

0:26 What Is A Market?
1:05 What Are Stocks?
1:16 Bonds
2:52 Shares
3:53 Summary
4:53 More information and FREE Guide at http://www.HowToInvestInShares.co.uk

Firstly, a market is somewhere where you can go to buy something or to sell something. So a market is somewhere where buyers and sellers congregate and they make their trades by buying, selling, swapping or exchanging something.

A stock market then, is a place where you go to trade stocks. So it’s where you buy and sell stocks. So what are stocks?

Stocks are one of two things. They are either bonds or shares.
Bonds are IOU’s. So if I wanted to buy some bonds, I would go to a stock market and buy some bonds from either a bank in the form of a savings bond; or a Government in the form of a Government bond or GILT as they are sometimes called; or I would buy corporate bonds from a company.

Say I want to buy a single bond for ,000 or £1,000. Then I am investing money in a bank, a company or a Government and they give me a modern form of IOU. In return for me lending them money, they pay me interest on that bond and normally there is a future date for the bond when the IOU will be reversed and I get my money back. That’s not always the case, but more often than not it is.

In the meantime, as the bondholder, the second advantage of the market is that I can trade my bond with other people. I could sell my bond to another investor, or I could have bought my bond from another investor who had previously got it from a bank, a Government or a company at the time it was initially issued on the primary market.

The other form of stocks are shares and these are small pieces of companies. So if I’ve got a company and I want to raise money on a stock market, I would go to the stock market and I would float either the entire company in the form of an IPO (Intial Public Offering) or I would issue new stock, new shares, to the market. So, in this case, I am using the primary aspect of the market to raise new funds.

Of course, having issued those shares to new investors, those share investors need a method of trading those shares, selling them on to other investors as the share prices change. That’s the secondary aspect of the stock market that allows investors to buy and sell shares on the secondary market as opposed to on the primary market.

So in summary then, a stock market is a place where you can go to trade stocks i.e. bonds and shares and a stock market has a primary function and a secondary function.

The primary function is where new shares and new bonds are issued by the primary issuer, that is the company, the Government or the bank and then it has a secondary market where those investors who bought the bonds and shares in the initial primary market can sell them on.

Of course, as an investor, you have a choice. You can buy shares or bonds at the initial time of issue in the primary market and/or you can buy those shares in the secondary market.

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What Is A Stock Market – A Beginners Guide

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