Share
Shares, also known as stocks or equities, represent ownership in a company and serve as a key instrument in the world of finance. These financial instruments are divided into units of ownership, each known as a share, which are traded on various stock exchanges worldwide. Owning shares grants individuals a proportional claim on the company's assets and earnings, entitling them to a share of profits and dividends.
How does the stock market work?
Share trading majorly takes place on stock exchanges, for instance, the New York Stock Exchange (NYSE) or London Stock Exchange (LSE). The exchanges facilitate seamless buying and selling of shares between the concerned entities.
What moves stock markets?
It is primarily the share supply and demand that influence the price movement of the company’s stock on an exchange:
Share Supply
The number of available shares in any company is limited and controlled based on the company choosing to release more or buy back some stock to reduce supply. In case a company releases more stock, while demand does not rise to befit the increased supply, the share price is likely to go down. A buyback, on the other hand, without a corresponding fall in demand, the company’s share price will likely increase.
Share Demand
Demand for the company’s share price can fluctuate based on a wide range of factors, listed below:
Earnings reports
The content of quarterly earnings reports and other major announcements influence the company’s share price, as traders and investors speculate over its performance based on fundamental analysis.
External factors
Macroeconomic factors, including data releases on GDP, retail sales, oil inventory data, interest rates and Fed meeting outcomes, play a major role in influencing share market.
Sentiment
Comments from a major investor or influencer, that may not be justified from fundamental analysis perspective, might trigger stock market movements.
Steps to making your first investment
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Define your financial goals: Start by determining your investment objectives and the purpose of your investment.
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Assess your risk tolerance: Understand your risk tolerance, which refers to your comfort level with the potential ups and downs of the investment market.
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Meet with a financial consultant: to discuss your financial goals, risk tolerance, and investment preferences.
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Open an investment account: Complete the necessary paperwork to open an investment account. Provide the required identification documents and fill out any application forms.
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Fund your investment account: Transfer funds from your bank account to your investment account.
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Monitor your investments: Regularly review your investment portfolio and monitor its performance.
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Stay disciplined: Stick to your investment strategy and maintain a diversified portfolio.
Top Investment Assets
Vanguard S&P 500 ETF | VOO
Objective: 500 Index Fund seeks to track the performance of a benchmark index that measures the investment return of large-capitalization stocks.