Basics Of The Stock Market

Within this guide we will examine the key qualities of the stock market. Stocks are traded on a market (a physical location) or on the counter (OTC) between agents via computers. Shares of smaller businesses, many bonds, and also mutual funds are usually traded OTC. The greatest and most well-known stock exchange is the New York Stock Exchange (www.nyse.com). It’s located at 11 Wall Street in the financial district of lower downtown Manhattan of New York City. Many nations throughout the world possess their own stock trades.

Stock Market and bonds are bought and sold through agents who get a commission on each securities transaction. The stock and bond markets are heavily controlled. From the U.S. the main securities regulator is your U.S. Securities & Exchange Commission (www.sec.gov).

Another important topic for an understanding of the stock market is learning about the Dow. The “market” in this context is generally with regard to the Dow Jones Industrial Average and is well known just as “The “Dow. So what is the Dow? It’s an index (group of shares) reflecting the worth of the 30 largest public companies in the U.S., such as IBM, Exxon Mobil, etc.. The Dow was formed by Charles Dow and Edward Jones several years ago. It acts as a barometer of the state of the market. The Dow (along with also the value of all stocks) are influenced by shareholders’ psychological variables (for example, investor confidence), political and economic events, wars, and disasters.

There are different indexes other than the Dow. Examples would be the Standard & Poors (“S&P 500), Russell 2000, NYSE Composite, etc.. Why are there so many? The indicators are groups of shares which behave as performance benchmarks for money managers, like individuals who manage mutual funds. Mutual funds can have portfolios of large company stocks, small company stocks or even a mix. If a mutual fund’s investment objective is to invest in smaller sized companies, the fund manager wouldn’t use the Dow as a reference but another indicator, since the Dow is an index of large company stocks.