What is the Stock Market?

The stock market is a commercial platform for people and organizations to trade company stocks and derivatives of stocks. Similar trading platforms are the bond market and the commodities market. The bond market is an over-the-counter environment that deals with trading in bonds, while commodities are sold in the commodities market. Stocks are listed on stock exchanges. These are corporations or mutual fund organizations where buyers and sellers of stocks meet and conduct transactions. Stock exchanges in the US include the New York Stock Exchange (NYSE), the NASDAQ, the Amex and other regional exchanges such as the Pink Sheets and the OTCBB. Exchanges in Europe include the Paris Bourse, which is now officially a part of Euronext, the Deutsch Bourse and the London Stock Exchange.

What is the Size of the Global Stock Market?

The size of the global stock market is valued at $22.5 trillion and is half the size of the global bond market, valued at $45 trillion. The worldwide market for derivatives stands at an imposing $300 trillion and major US banks comprise a third of this figure, at $100 trillion. The difference between the market for derivatives and the stock market is that the latter refers to actual value, while the former refers to notional outstanding amounts.

Buying in the Stock Market

Most people tend to think that a well-priced stock is a good buy. There are others who rely on instinct while buying stock. However, these are not always the best parameters to base an investment on and remember that buying stock is an investment. You need to know that the stock you are investing money in is reliable and is actually as good as the name or the price it carries.

While price may not be a strong clinching factor if you are looking at buying stock as a long-term investment option, it is still a good idea to be sure about what you are investing in. That's why you must do research on the company you're investing in, as well as the company you're investing through, whether that's a mutual fund or through a broker.

One key to remember is NEVER to go with a load-bearing mutual fund. Paying a 'load' means you pay an up-front sales fee, plus a commission on any of your earnings to the mutual fund. There is no reason to pay that fee because there are plenty of great mutual funds out there that are 'no load' funds.

Three Things to Know Before You Start Buying

There are three things you should know when you are thinking of purchasing at the stock market:

a. What the company you are planning to invest your money in does. You are, after all, going to part with your money when you buy stock in a company. Therefore, it is in your best interest to know about the company you are planning to invest in.

b. The growth curve of the company. This is very important, as this will give you an idea about what shape your money would be in over a period of, say, five years. You should know what the previous and existing revenue and income of the company is. This gives you a fair idea about the financial health of the company, which in turn will be a direct pointer to whether your money will be safe here or not.

c. How much you are willing to pay. This is another critical question. Even after you find that the company you are planning to invest in has a name in the market and is doing well financially, you still need to know why you're investing. If you're looking for a long-term investment, you'll probably diversify your money by investing some here and some there. In case one sector does poorly, the other sectors you've invested in can keep you from losing everything. If you can handle risk and you're looking for fast cash - it's possible but not recommended to look into day trading. The better idea is to be safe and be knowledgeable.

The stock market doesn't have to be something that scares you or seems like a foreign language. Put in a little bit of research because what else in your life deserves research if not your money? Ideally, in time, you'll be able to invest your own money where YOU see fit, and not take so much 'wise advice' from everyone else who sells their opinion. Be wise yourself by educating yourself. Then you can make the stock market work for you.