Stock Market size is more than $60 trillion across the world.Now that’s a tonne of money.
By investing in stock markets you have the option of making more returns than your regular fixed returns like bank FD, bonds etc.
To make most out of stock markets lets begin with the stock market introduction and basic terms.
Stock Market is a place where the transaction of financial securities happens. These financial securities include stocks, mutual funds, derivatives etc.
Now let’s look at few major securities traded inside stock market.
List of major financial securities in stock markets.
Typically a stock market can consist of various securities based on stock exchange regulations of each country. We have listed out major securities which are popular.
Shares or equity of exchange-listed companies can be traded in stock markets. Individuals can buy or sell the stocks.
Selling of stocks without owning it is called as short selling.
Investors can buy stocks if they think it will be more valuable and the price of stock might increase in the future.
Owning stock or share of a company means part ownership in the company.
Your ownership stake increases as you acquire more stocks of a company.
Derivatives are contract specific products derived from an underlying asset such as stock or index. Price of an underlying asset is called as spot price.
These derivatives contracts expire weekly or monthly.Major traded derivatives are stock futures,stock options,index futures,index options,currency contracts and commodity contracts.
Futures are derivatives in form of contracts. It has an expiry date and buyer of a futures contract has an obligation to take complete delivery on the day of expiry.
An individual can buy or sell a futures contract and exit positions before expiry date to avoid complete delivery.
Options are also a type of derivative contracts which can be bought and sold. Unlike future contracts options also have weekly expiry contracts.
Understanding options are bit complex and we have simplified it with our options guide.
Bonds are a debt instrument which promises a return to investor or buyer at maturity. We can categorize it as a fixed income instrument.
Government bodies, municipalities etc can issue bonds.
Mutual funds are investment schemes managed by large banks or institutions or fund managers.
It consists of risks involved with market conditions.
It is managed professionally and investments are usually diversified in a variety of assets.
This provides retail traders with an opportunity to invest their money in professionally managed funds.
In commodity market materialistic products like gold, silver, copper, crude oil etc are traded physically as well as electronically in form of derivative contracts.
Commodity derivatives also have options along with futures contract.
History of Stock Market
Stock market history is almost unknown but the world’s first stock exchange is known to be Amsterdam Stock Exchange.
Back in 1602 Dutch East India Company got listed in Amsterdam Stock Exchange and became the first company to be publicly traded.
Stock Market In today’s World
Our world is at fast development phase and transactions in stock markets these days happens electronically.
Stock exchanges like NASDAQ operate completely in electronic form without a trading floor.
Now that you have read our stock market introduction, its time now to read our stock market basics and terms post, for further understanding of stock markets.