Does stock market work
It is a very tricky question whether a stock market works for a trader or an investor. It depends on the point of view of the person involved in the stock market. It may work for the investor sometimes, while it may work for the trader at another time. There are always good and bad aspects involved in the stock market trading system.
First of all, lets see how the stock market works. Most of the TV news channels and newspapers include the information about the stock reports. Terms like Dow Jones, NASDAQ and blue chip are seen in these reports. These are the names of various stock markets. The performance of any stock market is verified in different ways. There are numerous types of measures that help in evaluating the stock markets. Dow Jones Industrial Average or DJIA is one such measure. The evaluation is done on the basis of transportation stocks, industrial stocks and utilities stocks. Each of the measure includes the average of closing prices.
There are two types of investment returns. These are namely yields and total return. Total return reflects the total amount of current income along with the capital loss or gain. Yield, on the other hand, is the interest paid or the amount of dividend on the investment. These returns are different in different cases, yet termed as same by the investors. Whenever the investor invests some amount of money, there is investment risk involved. One can lose the money or the investments just wont perform according to the plan. The investments which promise higher returns involve greater risks.
The investment is classified into two types, namely own or loan. An investor can own shares, stocks, real estates or other equities in the stock market. In this manner the investor is the buyer in the stock market. On the other hand, the investor can lend money to a particular company. The company promises to return back that amount along with the interest.
When an investor is a buyer, he generally purchases the stocks. The stocks of any particular company are the small parts of ownership in the company. The amount of stocks indicates the percentage of ownership of the investor in that company. The investor is known as the shareholder of the company. The shareholder gets a share of profit the company attains. This profit is given in the form of annual dividends to the shareholder. When the prices of the shares increase, the shareholder can sell these shares to another investor. This way he can make money by selling the shares at a higher price than the amount invested by him. People also invest by lending money to the companies. The bond is a common way to lend money to the companies.
The stock market works in good aspects depending on the investors performance. The stock market comprises of high potential. The rewards in the stock market do not depend on the time factor. The investors investing smartly in the stock market can pull out a huge amount of money out of the market. The stock market pays according to the performance irrespective of the time. Unlike the regular jobs one can get the benefit at short intervals. The share market is completely a self employed job. As a result limitation of work time is not involved.
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