Shares are one of the most popular assets in financial markets. When you buy a share, you are buying a ‘piece of ownership’- of a company. So if you are thinking of trading shares, it is essential to research the company itself and the industry it belongs to.
An added benefit of owning shares is receiving dividends. Dividends are paid twice a year, and they show your part of the company’s profits. How much you receive depends on how much the management distributes to shareholders and how much it reinvests back into the business.
How does the stock market work?
The majority of trading takes place on stock exchanges like the New York Exchange or London Stock Exchange, making it easy for different parties to buy and sell between one another. Today, online trading has powerfully come to the stage, and it makes possible the communication of the provider and the client through a trading platform.
What moves stock markets?
Like any other asset, the most crucial driver of share price volatility is supply and demand.
The number of shares available in any company is limited- although it may decide to release more or buy some back to cut off the supply on the market. With simple logic, if a company releases more stock and the demand does not rise to match the increased supply, its share price will go down. Meanwhile, a buyback without a corresponding drop in demand will increase a company’s share price.
While a company usually has full control over the supply of its shares on the market, demand can fluctuate due to a wide range of reasons. There are three most important: earnings reports, external factors, and sentiment.
Most of the stock exchanges ask the companies listed in their lists to release reports showing their financial performance once every quarter, with a full report once a year. Traders and investors refer to these reports’ details when making the fundamental analysis before deciding where to make their investments.