By Tye Jayrel
Most children my age would prefer to play a computer game, but learning about the stock market is something that even children can understand if given the exposure.
The stock market broadly refers to the collection of exchanges and other venues where the buying, selling, and issuance of shares of publicly-held companies take place. This sounds really complicated, but I will explain it to you simply enough that you will understand.
Stock Markets are just like supermarkets, a system for buying and selling securities, or stocks and bonds. Got it?
Did you know what stocks, bonds and securities are? A stock is a share in the ownership of a company, a bond is an agreement to lend money to a company for a certain length of time and securities are securities as investments, or ways of possibly earning money.
While most businesses are made by small groups of people, when a company “goes public,” its founders decide to sell shares of stock and, in turn, receive money from buyers.
The first modern stock trading was created in Amsterdam when the Dutch East India Company became the first publicly-traded company. To raise capital, the company decided to sell stock and pay dividends of the shares to investors. In 1611, the Amsterdam stock exchange was created.
The Stock Market is not a physical market; instead, it is a collection of all the stock exchanges. Each country has its own special Stock Market. For example, New York Stock Exchange (NYSE) and Nasdaq in New York; Shanghai Stock Exchange and Tokyo Stock Exchange (TSE). In Malaysia, it is known as Bursa Malaysia.
When people say that the Stock Market is going up, it means that the price indexes are going up and this is also known as the bull market. Vice versa, the Stock Market going down means price indexes are going down. People describe this downward trend as the bear market, because after the bear stands up, it will eventually need to come down.
Investors make profits from the Share Market by buying at a low price but selling at a high price. Investors whothat experience crashes can lose money if they sell their stocks at a very low price, instead of waiting for a price rise.
Now, do you understand the concept of the Stock Market? I hope you do, at least at a basic level. That’s all for now. Bye.
Jayrel is 9 years old.
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