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  • Writer's pictureBBC Content Team

Finance: What is the Stock Market and How Does it Work?

The stock market is very complex with trades and investments. While it does support a market economy, there is so much competition that it is so hard for small companies to even grasp any support from different investors or shareholders. The deal is, if you have more shareholders than other companies, you are going to be set and you will have more people invested in the company, which makes other people come to you. That is what businesses are trying to do in the stock market.

The stock market cannot allow people to just invest money in the company, but they also have to hire a dealer to even invest in the company. Most investors also buy stocks from mutual funds, which are used for companies that buy a collection of stocks. Most stocks are usually common, but some are preferred.

Now let us talk about the advantages of the stock market. Companies sell stocks because they think that the stocks will get them an enormous amount of financial capital. Even though they might get so much money from even selling the stocks, the companies need to have an enormous income even to fit the stocks. Individuals use the stock market because the returns are much better than those of bonds and commodities.

Now let us talk about why the stock market affects the economy. A strong economy helps businesses because they will get more capital because of the way the economy is stable and thriving. Companies can get the money because the government can pay them. If the companies think that the economy is slow and not going in the right direction, they will invest in bonds, which are much safer investments. While the stock is very competitive, the economy always determines what will happen with the stock market.

Remember, people are investing in these different companies so that they can get the money they want when they invest. The companies will have shareholders who give them a share of a company, usually 10%, and they have a say in the company as a whole. If the company does not do so well, people are going to opt-out and think that this company is not doing very well and leave because they want their money and do not want to waste it on a company that is doing very well.

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