What are stocks?

What are stocks?

From the outside, the Stocks | Forex | Cryptocurrency market seems to be a mysterious world where numbers and patterns are moving up and down on the screen.

A place where fortunes are won and lost every day, a place where the world's biggest auction takes place, a place where billions of dollars trade hands every day, and there are many more buzzwords about the stock market.

But look a little closer, and you will find success along with failure, murder, and suicide (sorry to say but it's true). You'll find one who has made billions of dollars and another who lost everything.

❝ The stock market is a device for transferring money from the impatient to the patient

— WARREN BUFFETT
stock-trading

Knowing the bitter truth about the stock market, a question comes to our mind why the financial market is unpredictable?

The answer is financial market becomes a place for corporate scandals, scams, and schemes, and insider trading (we don't want to discourage you but this is the truth). But it is also the place where dreams can come true.

A stock market is a commonplace for traders and investors to get together to buy and sell assets and commodities.

In simple words, a stock market is a place for buying or selling stocks

Need Of Stock Market

  1. Stock market acts as an indicator of the economic cycle.
  2. Companies can raise capital through the stock market.
  3. Stock market creates jobs (hundreds of thousands of people are engaged with the financial market).
  4. Provides an extra source of income.
  5. Individual can increase their personal wealth.
  6. Through the stock market one can minimize capital risk by some strategies such as hedging or diversification.
  7. One can beat the effects of inflation through the stock market

Financial Instruments that are traded in the stock market

The financial instrument is assets that can be traded, not all financial instruments are traded on the stock market like 'cheque' is also a financial instrument but not traded on the stock market.

  • There are mainly four types of financial instruments that are traded on the stock market which are as follows:
    1. Bonds
    2. Stocks/Shares
    3. Derivatives
    4. Mutual Funds

Types of stocks

  • The major types of stocks that you should know as a trader / investor
    1. Common stocks
    2. Preferred stocks
    3. Value stocks
    4. IPO stocks
    5. Growth stocks
    6. Income stocks
    7. Domestic stock
    8. Small-cap stocks
    9. Mid-cap stocks
    10. Large-cap stocks
    11. Dividend stocks
    12. Non-Dividend stocks
    13. Blue chip stocks
    14. Penny stocks

Diversifying your portfolio and not limiting yourself to just one sort of financial instrument is the greatest way to invest in the stock market.

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