Publish Date: in Finance101
The stock exchange is considered the investment index in a country. It consists of shares of various companies available for sale in that country. However, the majority of the time, most people don’t really understand the specifics behind it. Here we will outline the stock exchange basics to gain a preliminary understanding of how it works.
First and foremost, to understand what the stock exchange is, we first need to understand the meaning of a share in a company.
Company shares are essentially a stake in the ownership of a company. When a company makes a public offering through the stock market, any person could become an owner in this company by buying a certain number of shares. The percentage of ownership of this individual depends on the number of shares he/she has purchased. In most cases, the buyer does not have a say in the company's day-to-day running unless he/ she owns a minimum of 51% of the company shares.
as the saying goes, ‘high risk, high reward.’ It’s up to you to decide if that risk is worth it.
In the past, individuals would buy shares through a liaison who would purchase them on their behalf. These are intermediaries between the buyer and the company that is offering shares in the market. However, nowadays, things have changed considerably, and you can easily buy shares online. Therefore, this gives you much more flexibility, is faster, and also cheaper.
When a company gives a public offering for the first time, it can decide the share price. This price depends on the market’s evaluation of the company's value, capital, assets, and so forth. After this first offering, the share price then depends on supply and demand in the market. In addition, various external factors may affect the share price, such as the company's reputation, stability of the local market, governmental influences, etc.
For this reason, investing in the stock exchange is considered high risk compared to investment in real estate or investment certificates. However, at the same time, the percentage of profits are higher, and as the saying goes, ‘high risk, high reward.’ It’s up to you to decide if that risk is worth it.