The Basics of the Stock Market

What is the Stock Market?  How does it Work?

I have done some research on the best way to portray what the stock market is and how it works.  Many sites provide a great explanation across the spectrum of simplicity to complex.  Also interchangeably referred to as a stock exchange, the stock market is a place where companies can offer an avenue to raise capital (i.e. Money) to use for the objective of putting into business operations and/or fund growth.  

Companies get on the stock exchange by doing an initial public offering (IPO).  This is a fancy acronym that effectively means the process of going from a private company to a public company.  A private company is a firm that is privately owned.  When a company does an IPO they are offering their shares to the public, allowing the general public the ability to have an ownership stake in the company.  The level of ownership in the company is based on how many “shares” you buy and own.  

Guess you are wondering what shares are?  A share is the mechanism or unit of a person’s ownership in a company.  If you buy 100 shares of a company’s stock that represents a certain percentage ownership stake in the company.  A company has a certain amount of shares outstanding or available that the public can purchase.  Therefore, if the company has 100,000 shares outstanding you would have a 0.1% ownership stake in the company (100 Shares/100,000 Shares).  

How do you Invest in the Stock Market?

If you have a retirement account or 401K you are very likely to already be invested in the stock market.  Within retirement/401K accounts you typically see your money in mutual funds or ETFs.  I will be discussing the different types of investments later in this blog series.

You can purchase individual stocks through a brokerage account or an individual retirement account like an IRA.  An easy way to get started is through online brokerages.  Brokerages act as the intermediary between you and the stock exchange.

So you are probably asking yourself if you should do your own investing or have someone else manage my money?  Stay tuned for future Blog Posts.  

Really hope you are having a great day and look forward to getting your feedback.  If you have any questions you can email me at [email protected] or go on my facebook page (https://www.facebook.com/HammerTimeFinance) and send me an IM or post on my page.