Stock markets are a way for companies to raise the money that is needed for growth and evolution. Companies could choose to raise this money by incurring debt, however they would have to pay a large amount of interest on that debt. This is where stocks come in to play. Companies rather choose to give away some of the company to those who are willing to purchase stocks and these people who buy these stocks now become part-owners of the company, also called shareholders.
When you purchase a share, you’re buying a piece of a company. When a company needs to raise money, it issues shares, which is done through an initial public offering (IPO). This is where the price of shares is set based on how much the company is estimated to be valued for, and how many shares are being issued. The company keeps the money that was raised to evolve and grow its business, while the shares continue to trade on an exchange, such as the Trinidad and Tobago NGL Limited (TTNGL).
Over time, stocks increase and this is largely why many investors select different stocks in various sectors (diversification). Mature and well established companies can also pay a dividend to shareholders. A dividend is usually a cut of the company’s profit, which the company sends to shareholders as long as the company continues to pay the dividend. Aside from the dividend, the share price will also continue to fluctuate while the losses and gains associated with the given share price are independent of the dividend. Investors seeking regular income from their stock market investments tend to favour buying stocks that pay high dividends.
The stock market however refers to the entirety of the collection of markets and exchanges. Also known as the equity market, the stock market is one of the most important components of a free-market economy, because it provides companies with access to capital in exchange for giving investors a slice of ownership.
There are many different roles associated with the stock market, including stockbrokers, traders, stock analysts, portfolio managers and investment bankers. Each one has a unique and quite vital role, but many of the roles are intertwined and depend on each other to make the market run smoothly and effectively.
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