The stock market is mystifying to people. The complicated and intricate ups and downs of individual stocks, the tricky notions of investor confidence, and the sophisticated terminology result in many people giving up due to sheer bafflement. The thing about the stock market is that it is pretty easy to understand once you get a few basic concepts down. These concepts have to do with the nature of an individual stock, the price of that stock, and how the stock market enables the buying and selling of stocks. The stock market is not just about individual trading and profit-making; it provides a useful social service by telling outside observers the state of investor\’s confidence in the economy.
The total stock of a given company is the amount of money that was originally paid into it by creditors and/or investors. The company\’s stock is split into shares, basically little pieces of the company that, when held by a given investor, entitle that investor to a certain percentage of the company\’s profits and the right to vote on company policy. The stock price is the price of a given share of the company\’s stock, and this price fluctuates according to supply and demand, the moves of individual investors to buy or sell the company\’s stock, and other market variables.
The stock market does look extremely complicated on first glance, but it actually makes sense once you get over the initial information overload. In this series of articles, you will learn what the stock market is, how it works, and other types of markets, such as the futures and forex markets.