Introduction
The stock market is a huge platform for sellers and investors to buy and sell the shares of different companies and run their business. Stocks are the shares of companies, small or big companies offer their shares in the stock market and investors invest in these shares. The ups and downs in the currency value and economic situation interfere to change the rates of these shares. Sometimes the investors get huge profits and sometimes they have to face loss. So one should understand How the Stock market works, before investing.
How it works
Here we are going to explain the working of the stock market in short, for further assistance and the information of ups and downs in the stock market, follow the link How the stock market works. The stock market works by the mutual connections of investors and sellers. Investors are buyers who buy stocks from sellers. The sellers mostly sell the shares of other companies and these companies offer their shares in the market. Buyers, who want to invest, purchase these shares, and then wait for the time to sell these shares. In short, the stock market works in the way:
- A company sells its share/stock
- A buyer buys that stock
- The selling company or individual asks for a price to sell the stock/share
- The investor/buyer offer a price lower than the asked price
- Then the buyer has to offer the higher price or the seller has to lower the asked price
- After both seller and buyer agree on a price, the seller sells the stock
- The investor waits for the time and then sells the stock to another investor if the time is suitable
- In this way, the stock market works
How to become an investor
If you have money, it doesn’t mean that you can easily become an investor in the stock market. There are levels of investment and exchange. First, a portfolio is built by reviewing all your investment data. This portfolio is made on a different basis like:
- Your company
- Sector
- Expected returns
- Risk capability that how much you can invest
- Risk tolerance that how much loss you can bear
- Different bonuses and payouts etc
You can only invest according to your level. So money is the secondary thing, investment level, and portfolio is the first thing. You can only invest depending upon your portfolio.
What should you do before investing in the stock market?
Before you decide to buy shares of stock in the stock market, you should learn first. Understand the working of the stock market and get a complete idea. Do not invest randomly and blindly, be careful about your investments. Read and understand the algorithms working behind the stock market and learn how the stock market works. You should do the following things before investment:
- Read blogs about investment and stock market
- Read the books
- Check the financial websites
- Understand the ups and downs in the stock market
