Stock Market - Top 15 things you should definitely know..!!

1. The stock market is a marketplace where stocks (or shares) of publicly traded companies are bought and sold.

The stock market is a vital financial marketplace where stocks or shares of publicly traded companies are bought and sold. This allows companies to raise money by issuing stocks and investors to buy these stocks and become shareholders, which means owning a part of the company. The stock market can be divided into two categories, the primary market and the secondary market. In the primary market, companies issue new shares while in the secondary market, existing shares are bought and sold. In the stock market, the prices of stocks are determined by supply and demand in the marketplace. The stock market is a great way for companies to raise capital, and for investors to potentially earn a return on their investment, but it's important to note that it also comes with more risk than other more conservative investments such as bonds or savings account

2. Companies raise money by issuing stocks and the investors who buy these stocks become shareholders, owning a portion of the company.

Companies raise money by issuing stocks, which are shares of ownership in the company. Investors who buy these stocks become shareholders and own a portion of the company. In this way, companies can raise money to fund operations, expansion, research and development, and other investments without having to borrow money. By issuing stocks, companies can also gain access to a larger pool of capital. The process of issuing stocks is called an initial public offering (IPO) in which a company goes public and shares are sold to the general public for the first time. Once the shares are issued and sold, they can be traded on the stock market, and their value can fluctuate based on various factors such as the company's performance, industry trends, and overall economic conditions. As a shareholders, they have the right to vote on certain matters such as the selection of directors, changes to the company's bylaws and also have access to the company's financial statement.

3. The stock market can be divided into two main categories: the primary market and the secondary market. In the primary market, new shares are issued by companies, while in the secondary market, existing shares are bought and sold.

In the primary market, companies issue new shares of stock to raise capital, this process is also known as an Initial Public Offering (IPO). When a company goes public, it sells shares of stock to the general public for the first time. The primary market is where the stocks are initially sold to the public and is done by underwriters or investment banks representing the issuing company. This is where companies get the money they need to grow their business and operate.

The secondary market, on the other hand, is where existing shares are bought and sold among investors. This is where shares are traded after they have been issued in the primary market. This is where investors buy and sell shares with the goal of making a profit. In the secondary market, the prices of shares are determined by supply and demand and can fluctuate based on various factors such as company's performance, economic conditions, and investor sentiment. The secondary market is also known as the stock exchange and it's the place where most people buy and sell stocks, including major exchanges such as the NYSE and NASDAQ

4. Stock prices are determined by supply and demand in the marketplace.

When more people want to buy a stock than sell it, the price goes up. This is because as the demand for the stock increases, so does the price investors are willing to pay for it. On the other hand, when more people want to sell a stock than buy it, the price goes down. This is because as the supply of the stock increases, the price drops as there are more shares available for purchase. The balance between supply and demand for a stock is what ultimately determines its price.

Factors that influence the demand for a stock includes the company's financial performance, management and future growth prospects, industry trends, and overall economic conditions. However, it's also important to mention that investors sentiment, news and events also play a role in fluctuation of stock prices. And hence it's also referred as stock market sentiment. Stock prices can be volatile and can change rapidly based on these factors, making the stock market a high-risk, high-reward investment.

5. Different stock markets around the world have their own indices, such as the S&P 500 in the US and the FTSE 100 in the UK, which track the performance of a selection of stocks and serve as a benchmark for the overall market.

These indices track the performance of a selection of stocks that are representative of the market as a whole. Two examples of well-known global indices are the S&P 500 in the US and the FTSE 100 in the UK.

The S&P 500, also known as the Standard & Poor's 500, is a stock market index that tracks the performance of 500 of the largest publicly traded companies in the US. It is considered to be a leading indicator of the US stock market and is often used as a benchmark for the performance of the broader market.

The FTSE 100, also known as the Financial Times Stock Exchange 100, is a stock market index that tracks the performance of the 100 largest publicly traded companies in the UK. It is considered to be a leading indicator of the UK stock market and is often used as a benchmark for the performance of the broader market.

There are many other indices that track the performance of stocks in different markets around the world, such as the Nikkei in Japan, the CAC 40 in France, and the DAX in Germany. These indices serve as a measure of the overall health of a country's stock market, and can provide useful information for investors looking to gain a broader understanding of the market conditions.

6. Stocks can provide long-term growth potential, but they also come with more risk than more conservative investments such as bonds or savings accounts.

These indices track the performance of a selection of stocks that are representative of the market as a whole. Two examples of well-known global indices are the S&P 500 in the US and the FTSE 100 in the UK.

The S&P 500, also known as the Standard & Poor's 500, is a stock market index that tracks the performance of 500 of the largest publicly traded companies in the US. It is considered to be a leading indicator of the US stock market and is often used as a benchmark for the performance of the broader market.

The FTSE 100, also known as the Financial Times Stock Exchange 100, is a stock market index that tracks the performance of the 100 largest publicly traded companies in the UK. It is considered to be a leading indicator of the UK stock market and is often used as a benchmark for the performance of the broader market.

There are many other indices that track the performance of stocks in different markets around the world, such as the Nikkei in Japan, the CAC 40 in France, and the DAX in Germany. These indices serve as a measure of the overall health of a country's stock market, and can provide useful information for investors looking to gain a broader understanding of the market conditions.

7. Diversifying your portfolio by investing in a mix of stocks, bonds, and cash can help manage risk.

Investing in stocks carries a higher level of risk than investing in bonds or cash, but it also has the potential for higher returns. Bonds, on the other hand, are generally considered to be less risky than stocks but have lower returns. Cash, such as savings accounts or money market funds, is the safest investment option but also has the lowest returns. By diversifying your portfolio and investing in a mix of these different types of assets, you can spread out your risk across different investments, which can help protect your portfolio in case of market downturns or economic uncertainty. Additionally, including cash in your portfolio can also provide liquidity, which you may be able to use in case of an emergency or to take advantage of investment opportunities that arise.

8. Researching companies and keeping an eye on economic trends and news can help inform investment decisions.

This can involve looking at financial statements and performance metrics to evaluate the overall health and potential growth of a company, as well as following industry news to understand the broader economic conditions that may affect the company's performance. Additionally, following economic trends and news can provide insight into macroeconomic conditions that may impact markets and industries, providing a more comprehensive understanding of the investment landscape. By taking the time to research companies and stay informed about economic trends and news, investors can make more informed decisions that can potentially lead to better returns on their investments.

9. In addition to traditional stocks, there are also exchange-traded funds (ETFs) and mutual funds which allow investors to buy a basket of stocks or bonds in one transaction.

These types of investment vehicles provide diversification, which can help spread risk by allowing investors to own small pieces of many different companies, rather than just one. ETFs are similar to mutual funds in that they pool the money of many investors to purchase a diversified portfolio of assets, such as stocks or bonds, but unlike mutual funds, ETFs trade on an exchange like stocks, which means investors can buy and sell them throughout the trading day at the market price. Mutual funds, on the other hand, are priced once per day after the market close. These funds are professionally managed and usually focused on a specific investment objective like growth, value or income. With ETFs and mutual funds, investors have the ability to gain exposure to multiple investments at once, allowing them to diversify their portfolio and potentially reduce overall risk.

10. You can buy and sell stocks through a brokerage account, which can be opened online.

A brokerage account allows individuals to invest in the stock market by buying and selling stocks, bonds, mutual funds and other securities through an online platform provided by the brokerage firm. The process of opening an account is usually straightforward, requiring personal information and some form of funding to be deposited into the account, such as a bank transfer or check deposit. Once the account is opened and funded, investors can easily access and manage their portfolio online, as well as execute trades, track investments, and monitor market activity. Brokers provide access to research, analysis and trading platforms, giving investors a wide range of tools to help them make informed investment decisions. Some of the online brokerage firms also provide educational resources, tutorials and guides to help investors get a better understanding of stock market and the investment process.

11. The stock market is not the same as the economy as a whole and may not always be an indicator of economic performance.

The stock market is a financial market where publicly traded companies' stocks are bought and sold, the value of these stocks are determined by the company's financial performance, future expectations and the supply and demand of the market. The stock market can rise or fall in response to various factors, such as changes in interest rates, political developments, or company-specific news. On the other hand, the economy as a whole is a broad term that encompasses various factors such as employment, consumer spending, gross domestic product (GDP) and inflation. These factors are not always correlated with the stock market, which can move in a different direction than the overall economy. It's not uncommon for the stock market to rise while the economy is in a recession, and vice versa. Additionally, the stock market can move in anticipation of economic events, rather than in response to them. Therefore, it's important to understand that stock market performance is not always an accurate indicator of the overall economic health of a country.

12. Insider trading is illegal and refers to when individuals with access to non-public information use that information to make trades.

Insider trading is illegal and refers to when individuals with access to non-public information, such as company executives, directors or employees, use that information to make trades. This information can include things like upcoming financial reports, mergers and acquisitions, and significant contracts. Insiders can use this information to buy or sell stocks in their own company or related companies, or pass it along to others, such as family members or friends, who then make trades. Insider trading is illegal because it undermines the integrity of the markets and can be considered as fraud. Insider trading allows those with access to non-public information to profit at the expense of other investors who do not have the same level of information. The Securities and Exchange Commission (SEC) and other regulatory bodies actively investigate and prosecute insider trading cases. Penalties for insider trading can include fines, disgorgement of profits, and even jail time. It's important to be aware of and avoid insider trading, as engaging in such activities can have serious legal and financial consequences.

13. Day trading is a strategy where an individual buy and sell stocks frequently within a day aiming to profit from short-term price movements.

Day traders typically use technical analysis and tools such as charts and indicators to identify profitable trades. They aim to buy stocks at a low price and sell them at a higher price within the same trading day. Day trading can be a high-risk strategy and requires a significant amount of knowledge, experience and discipline. Day traders are often working with short time-frames and trying to take advantage of intraday price movements, which can be volatile and can also be influenced by a wide range of factors such as news, market sentiments, and economic indicators. Day traders also need to have access to sophisticated tools such as real-time market data, fast execution platforms and to be able to quickly respond to the market changes. Day trading is not suitable for everyone and can be a very high risk approach, it requires a significant amount of capital, as traders need to have enough liquidity to enter and exit positions frequently, in addition to the potential high trading fees, high volatility, and large potential losses.

14. Stock market can be affected by various external factors such as political events, natural disasters, and even pandemics, thus keeping an eye on world events and being prepared for unexpected events can be helpful.

These events can have a significant impact on the global economy and can affect the stock market in a variety of ways. Political events, such as elections or changes in government policies, can influence the market by creating uncertainty and affecting business confidence. Natural disasters and extreme weather conditions can disrupt production and supply chains, leading to changes in company's performance and financials. A pandemic like COVID-19, can lead to wide spread economic disruptions such as changes in consumer behavior, supply chain disruptions, and increase in uncertainty.

Keeping an eye on world events and being prepared for unexpected events can be helpful for investors to anticipate and navigate market changes. For example, they can adjust their investment portfolios, hedge against potential risks and even take advantage of opportunities. Regularly monitoring market news and reading economic reports, and making use of tools such as risk management strategies can also be helpful in managing the potential impact of such events on investments. It's important to remember, however, that no one can predict future market movements with certainty, and that diversifying your portfolio and maintaining a long-term perspective can help investors weather unexpected market changes.

15. Professional financial advisors can assist individual investors in understanding the stock market and in making informed investment decisions.

These advisors are trained professionals who have expertise in a wide range of areas such as investment planning, risk management, financial analysis, and portfolio management. They can help investors to create a personalized investment strategy that takes into account an individual's specific goals, risk tolerance and time horizon. Financial advisors can also provide guidance on asset allocation, portfolio diversification and rebalancing, helping to manage risk and maximize returns.

Financial advisors can also provide access to research, analysis and investment products that may not be available to the general public, giving investors an edge in making informed investment decisions. They can also help investors to stay abreast of market trends, economic conditions and world events, which can help them to identify potential opportunities and risks. Financial advisors can also help investors navigate the complex regulatory and compliance requirements related to the stock market and investment.

It's important to note that not all financial advisors are the same and it's crucial to find a financial advisor that is a good fit for your investment needs. You should check the qualifications, professional designations and years of experience of an advisor before engaging with them. Some financial advisors are also required to be registered with regulatory bodies such as the Securities and Exchange Commission (SEC) and should also have a fiduciary duty, meaning they are required to put the interests of their clients first.

Please note:- that it is important to conduct your own research and seek advice from financial professional before making any investment decisions.