A market is a private organisation that provides the necessary tools for its members, following the mandates of its customers, enter orders and conduct negotiations buying and selling facilities securities, such as shares in companies or joint stock companies, government bonds and Private bonds, certificates, equity securities and a wide variety of investment instruments. After the Forex, globally, the stock market is the largest.
The trading of securities in the securities markets is done on the basis of known and fixed prices in real time, in a safe environment for investor activity, where the transaction mechanism is totally regulated, which guarantees the Legality and security.
Participants in the operation of the stock exchanges are at the basic level, capital claimants (companies, public or private bodies and other entities, capital offerers (savers, investors) and intermediaries (brokers, ECN, etc).
The trading of securities on the stock exchanges takes place through stock exchange members, usually known as brokers, securities brokerage firms, brokerage houses, agents or brokers, according to the denomination they receive in the laws Of each country, who do their work in exchange for a commission. In many markets, other entities and individuals also have partial access to the stock market, as it is called the set of activities of primary and secondary market of transaction and placement of emissions of securities of variable income and fixed income.
In order to be able to list their securities on the stock exchange, companies must first make public their financial statements, since through them they can determine the indicators that allow them to know the financial situation of companies. Stock exchanges are regulated, supervised and controlled by national states, although the vast majority of them were founded prior to the creation of official supervisory bodies.
Characteristics of the stock market
- Profitability: whenever you invest in the stock market you want to obtain a yield and this can be obtained in two ways: the first is with the collection of dividends and the second with the difference between the selling price and the purchase price of the securities, That is, the gain or loss obtained.
- Security: the stock market, as we know, is an equity market, that is, values are changing in value both up and down and all this carries a risk. This risk could be made less if we maintain our securities over time, the probability that it will be a profitable and secure investment will be greater. On the other hand diversification is desirable; This means that it is advisable not to acquire all the titles of the same company but of several.
- Liquidity: ease that offers this type of investments to buy and sell quickly.
- Companies and states: companies, public or private bodies and other similar entities.
- Intermediaries: brokerage firms, brokerage and stockbroking companies, securities companies and securities and stock brokers.
- Short term investors: they risk a lot looking for high returns, they are called day traders and scalpers. They carry out transactions of short duration, even of minutes.
- Long-term investors: seek profitability through dividends, capital increases and others. Their investments are long term, so they generally do not take into account the daily rises and falls that the market makes.
- Investors with risk aversion: invest preferably in fixed income securities (Treasury bills for example).
Stock markets perform the following functions
- They channel savings towards investment, thereby contributing to the process of economic development.
- They bring in contact the companies and entities of the State in need of investment resources with the ahorristas.
- They confer liquidity on investment, so that bondholders can easily convert their stock or other securities into money.
- They certify market prices.
- They favour an efficient allocation of resources.
- They contribute to the valuation of financial assets.
On the other hand, the stock markets are subject to the risks of economic cycles and suffer the effects of psychological phenomena that can raise or reduce the prices of stocks and shares, being considered a barometer of economic and social events.