Stock Markets Exposed
How to understand the trades, finance and stock market?
I am trying to understand some business words but there are a lot of terms. What are the trades, finance and stock market for? What are the terms that are commonly used in those areas? What are the functions and effects of the different components of the financial world such as the Nasdaq, Dow, etc.?
Public Comments
- Read read read! http://finance.yahoo.com/personal-finance/glossary http://www.investopedia.com/ http://www.bloomberg.com/invest/glossary/bfglosa.htm http://www.forbes.com/tools/glossary/index.jhtml http://money.cnn.com/services/glossary/a.html http://www.duke.edu/~charvey/Classes/wpg/glossary.htm
- check out www.investorswords.com
- I think the best ways to learn the words is to start a stimulator game like investopedia
- Just some basics... when you think of "the market", think of an old-fashioned kind of marketplace, e.g. a bunch of stands selling fruit, clothing, etc (e.g. what we in the midwest call a "flea market"): you have buyers and sellers. Competition arises because generally there are multiple sellers of the same product. So in that market, you can trade. Typically, you trade cash for some goods. But in an "old fashioned" market, you could trade your goods for a seller's goods. Finance is really just the business of money. A lot of finance involves the borrowing, lending, buying and selling of money. Financing is in many ways the same as banking. An easy example is a home loan: you want to buy a house, but don't have enough money. But you plan to live there for 10 years, and you know that in 10 years you will *have* earned enough to pay for the house. But you don't have the money now. So you can borrow money from a bank to buy the house. But all that money is actually worth more than the amount of the loan: that's why you pay interest; and that's how the banks profit by lending you the money. In other words, if you take out a home loan, you actually pay more for the house than whatever the seller asks---that's the price you pay for getting the house now instead of waiting 10 years. But how much does the bank know to charge you? That's the business of finance! There's a fair amount of sophistication that goes into determining interest rates. The stock market is just like a grocery store, but instead of selling groceries, stock is bought and sold. Stock is nothing more than partial ownership of a company---some "share" of a company. Let's say Microsoft has 1 million shares outstanding, and you buy one share. Now you own one one-millionth of Microsoft Corp. Different stocks are traded on different exchanges. An exchange is more or less like a store. Think about how, with general merchandise, some brands are only carried at certain stores. Likewise, most stocks are only available on a particular exchange. The Nasdaq is an exchange where a lot of technology stocks are traded (e.g. Microsoft). Another big exchange is the New York Stock Exchange (NYSE). The "Dow" is a term that describes the Dow-Jones Industrial Average. Dow-Jones is the company that publishes the Wall Street Journal. They also maintain an "index" called the DJ Industrial Average, or "Dow" for short. This index is just a collection of companies' stock prices summed up. The intent is for someone to be able to look at the Dow and, at a glance, have an indication of how the stock market as a whole is moving. Generally, if the Dow is going up, most stocks as a whole are going up in price. Hopefully that's enough info to know where to start looking for more info. You asked an extremely broad question with no concise answer... I've only scratched the surface here!
