We talk about it and hear about it in the news but what exactly is the stock market? Simply put, the stock market allows every-day people to invest in real companies. The hope is that there is a resulting increase in capital for companies, which are available on the market. Investing in the stock market has the potential for one to make a substantial amount of money, but there are risks associated with investing.
Stock Market Exchanges
Companies offer their stocks through exchanges. You’ve probably heard of the two major U.S. exchanges: the New York Stock Exchange (NYSE) and the NASDAQ. The OTC Market or OTC Bulletin Board mainly plays host to penny stocks. Back in the day, investors bought physical shares of companies in the form of certificates. Most stocks trade electronically, today.
Around the world, there are multiple stock exchanges. These allow investors to trade stocks no matter what country they’re in. These stock exchanges can be either physical places or virtual gathering spots. For example, NASDAQ is a virtual trading post where investors focus on things like penny stocks to buy.
Store Of Value
More often than not the value associated with these companies has a direct connection to the value of their assets versus their liabilities. When discussing “actual ownership,” this refers to someone’s equity in any asset once all debts have been paid. What’s left is the actual value.
For example, if someone owns a valuable vintage automobile, and owes no payments whatsoever, this asset represents pure equity. In relation to investing in the stock market, shares of a company represent equity in a company, but this ownership does not come with accompanying liabilities of the actual underlying company.