Why bother with stock markets?

Julie Brownlee, Fsp Invest, 05 Jul. 2015

Tags: stock markets, stock market, what is a stock market, what stock markets do, role of the stock market,

If you want to invest in shares, you buy shares on the stock market.

Stock markets around the world list thousands of companies. In South Africa, the stock market is the Johannesburg Stock Exchange.

So what is the point of stock markets? And what role do they play?

Read on to find out…

What are stock markets?

Stock markets represent the place where the trading of shares happens. Stock brokers conduct all trading of shares on the stock market.

Think of a stock market like a fruit market. A stock market works in a very similar way.

The stock market brings together the buyers and sellers of shares. And by doing this provides a way for the value of shares to be realised.

A stock market matches a willing buyer of a specific stock with an investor wishing to sell the same stock.

Nowadays no trading occurs in one place on the stock market. Through computer systems, stock brokers buy and sell shares through the stock market.

The role stock markets play

Stock market has two functions…

A stock market’s primary function
Through listing on the stock market, a company can issue new shares in its business. This raises capital for the company.

Companies use this money to fund growth and to invest in projects.

This happens during a company’s initial public offering (IPO).

A stock market’s secondary function
Once a company lists, the stock market provides a market for the trading of a company’s shares.

It is this secondary function that interests most investors. When you buy and sell shares, this is the function of the JSE you’re using.

So there you have it. Why there are stock markets.

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