A stock market is also known as equity market. A stock market is basically a roof for trading of equity or percentage of owner ship of a public limited company. Usually a public limited company floats only 49% of its shares in market. If the float bigger percentage they risk a hostile takeover of management if all of the majority shares are bought by a single organization. For a company to sell its shares through stock market, it has to be a public limited company and has to be registered with the stock exchange of the country they have headquarters in. The shares are then given a value according to the value of the company ready to float its shares. The companies floating shares are usually doing for fundraising for its needs of financial assistance. Rather than going to banks for loan they opt for public investment to lessen the burden of interest rate and in return they give profits of their earnings. These shares are printed on a security paper for security purpose and is then floated in the market with the initial rate.
A company who has been granted a right to sell their shares to public has the right to decide what percentage of shares they want to float in market. The company has to publish an annual report of its operations and earnings and give dividends to the holders of the shares with respect to the profit the company has earned that very year. To give you a rough idea about how big is the stock exchange market worldwide, it is estimated to be around $790 trillion dollars which is approximately 11 times the entire world’s economy. So with these figures you can well imagine how much public investment is in circulation in stock markets at the moment. If you are looking for doing some investment in stocks, here are few tips to get you going safely:
- A share price doesn’t remain the same as when it was first floated. Its value changes because of many factors like, demand, company doing well or bad and so on. So when you are going to invest in stocks, take a bit of time and target few companies you think might be worth.
- Take information and past record of that particular company and see their future plans. You might also want to see their on-going deals and projects and their performance graph of last few years. Through this information understand why the shares dropped at a point in graph. Identify the weak links that effect the company’s shares.
- Get a firm grip of current affairs and government policies regarding taxes and VAT. The share prices fluctuate dramatically if a government imposes some extra tax on their commodity. The best time to buy will be after budget and to be on the safe side sell when it’s on peak or before budget if you sense some taxes coming.
- Natural disasters and political uncertainty can also effect the share prices and stock market as a whole. The increase or drop in the prices of shares are usually fake during those circumstance. So make sure that if you are investing then you should do it for a short period of time and bail out as early as possible.
Investing in stock market of trading is a very lucrative but risky business in a way. There are players in exchange market that setup a trend of hike and then bail out with great earning at the end and crashing the market. So study and research is very important; do not believe in investing on hunch, tip or market trend. Study and research on your own, if you play by rule of study and research you will eliminate a big percentage of unseen losses.