Jargon is often present whenever the stock market is discussed. The overuse of financial jargon, such as “margin” and “volume,” can put off any reader, but especially a young person who is easily bored or distracted.
It’s crucial that they avoid that trap at all costs if they care about their financial futures. Making money in the stock market is highly recommended. It’s a fascinating subject, especially when broken down into its basic components.
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KEY POINTS
- Like an online grocery store, the stock market allows you to buy and sell shares of various companies at different prices throughout the day.
- An index is a common reference when discussing the stock market because it is a measure of the market that is meant to be broadly indicative of the entire market.
- The primary market and the secondary market are the two main parts of the stock exchange.
- Online and mobile stock trading make it easy to put money into the market from anywhere.
- If a teen is interested in investing in the stock market but is under the age of 18, they will need an adult to open an account for them.
The Stock Market: What Exactly Does That Mean?
Shares, which represent fractions of a company’s total ownership, can be bought and sold on the stock market. Consider it like a virtual grocery store, but with these added benefits:
- You are investing in businesses rather than stocking up on food and household items.
- The day’s price is not the same as the next.
- You can buy and sell as well.
This grocery store acts as a matchmaker during business hours Monday through Friday, bringing together people who are looking to buy and sell with those who have items for sale.
Indexes
You may be wondering what exactly the media means when they say the stock market is up or down. In this context, “the stock market” refers to a particular index that measures the performance of a group of stocks.
Simply put, an index is a collection of stocks that have been placed in logical categories, or “aisles,” based on their similarities. That could mean something very specific, like selling the same kind of product, or it could mean something very general, like being from the same country or continent or simply being shares.
For your convenience, we’ve compiled a short list of the most prominent indices. They are used as indicators of the state of the economy in their home countries and, in many cases, the rest of the world.
S&P 500: The 500 biggest companies in the U.S. stock market
Dow Jones Industrial Average: Thirty big U.S. companies considered to be leaders in their industry
Nikkei 225: Japan’s 225 largest listed companies
FTSE 100: The 100 largest public companies in the United Kingdom
Euro Stoxx 50: The 50 largest public companies in continental Europe
Get to know the top 25 stocks in the S&P 500
The Stock Market: How Does It Function?
The primary market and the secondary market are the two main parts of the stock exchange.
Primary Market
Companies often issue shares to the public as a means of capital raising. They can either raise capital from people they already know and keep the business secret, or they can go public and solicit investments in exchange for ownership.
In an IPO, shares are initially distributed directly by the issuing company (IPO). Investors will be able to purchase a set number of shares at a predetermined price, with the expectation that their value will rise over time.
Secondary Market
Shares issued during an initial public offering (IPO) can be traded freely between buyers and sellers indefinitely after the IPO closes. The company is not involved at all in this instance. It consists of private investors transacting with one another.
We shall be discussing more on this in our next article. Keep an eye on this space and don’t forget to subscribe to our newsletter for the latest news and article.
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