The role of the stock market in the world of shares and investing

Fsp Invest, 15 Jan. 2014

Tags: stock market, what is a stock market, how does a stock market work, securities exchange, johannesburg stock exchange, jse, shares, market, investing, investors, trading,

There are stock markets the world over. Some countries may have more than one. But why do we need stock markets? No doubt you’ll be familiar with several of them, including our very own Johannesburg Stock Exchange, the London Stock Exchange and the New York Stock Exchange. Let’s take a closer look at the role of the stock market…

Let’s start off with a definition, Gareth Stokes in Fear, Greed and the Stock Market explains…

A market is a meeting place for buyers and sellers of a particular product.

Investors buy and sell shares like ordinary goods. So it makes perfect sense for there to be a place where investors can conduct a ‘trade’ in shares.

It would be of little use to own shares, or to offer shares for sale, if you didn’t have a place to realise the value of these shares.

A stock market is the place where this value can be realised. It facilitates the process of matching a willing buyer of a specific stock with a person wishing to sell the same share.

Stock markets are markets for trading shares

For this reason, countries all around the world established securities exchanges or stock markets.

Let’s look at the definition of a securities exchange…

A securities exchange is an organised marketplace on which investors buy and sell shares. Most stock exchanges serve dual functions as primary markets (where companies raise capital for the first time) and secondary markets (where existing shares are bought and sold).

South Africa’s only stock market is the Johannesburg Stock Exchange (JSE).

So there you have it, the role of the stock market in the world of shares and investing.

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