Practical Resources to learn about the stock market

what the stock market is, it is necessary to go far beyond the definition itself. Therefore, in this post we will touch on various aspects and components that actively participate in it.You will learn more about all these aspects below, but let’s start at the beginning:

What are the stock markets?

The definition of the stock market to that of a type of corresponds capital market where equities and fixed income are operated, through the sale of negotiable securities. Something that allows the channeling of capital from investors and users in the medium and long term.

The issuance, placement and distribution process depends on the participants, which are issuers, investors, intermediaries and other economic agents.

Negotiable securities issued by persons or entities, whether public or private, are also affected in the process. They are, for example, negotiable securities: company shares and negotiable securities equivalent to shares, participation quotas of savings banks, securitization bonds, mortgage participations, monetary marketing instruments, preferred participations, territorial certificates, warrants, among others.

Likewise, options contracts, forward interest rate agreements and other financial instrument contracts related to securities, financial instruments, raw materials, etc. are considered as negotiable securities.

Characteristics of the stock market

Among the most important characteristics of the stock market can be found the following:

Profitability

: By investing in the stock market it is expected to obtain a return for this. Something that can happen in two ways:

The collection of dividends

The difference between the sale price and the purchase price of the securities. In other words, with the capital gain or loss obtained.

Security

We are talking about an equity market. This means that values can change up or down, depending on the market oscillates. Obviously, this represents a risk, since it is not known with certainty if the investment will result in a profit. Investments in long-term securities have a greater probability of being a profitable and safe investment. Another way to reduce risk when investing is diversification. In this way the probability of having losses decreases.

Liquidity

: There is great facility in investing in securities, so buying and selling happens quickly.

Importance of the stock market

The main objective of the stock market is to help the movement of capital, thus contributing to monetary and financial stability. This is how the democratic use of stock markets encourages the development of more active and secure monetary policies.

In this way, the securities markets become places where intermediary agents and developed instruments exchange assets with each other. What facilitates the transparency and the freedom of the process of buying and selling the securities.

In them it is also possible to set the prices of the securities according to the order of the corresponding supply and demand law. In addition, this can be a very liquid investment for many investors, because regardless of the moment, they will be able to sell their shares.

Role of the securities markets

In summary, the stock market is of great importance in the national and international economy because it has the following functions:

Contributes to economic development by channeling savings into investment.

Provides investment liquidity, allowing security holders to convert their shares into money.

It places in contact with companies and state entities that need investment resources from savers.

They favor the valuation of financial assets and the efficient allocation of resources.

How the stock market works

The stock market is a set of institutions and financial agents that negotiate on different types of assets, such as stocks, bonds, funds, etc. All this using the instruments created specifically for this purpose as a means.

It works by partially capturing personal and business savings, an extra financing point for those companies that are in processes such as the issuance of new shares.

Unfortunately, the stock market is also subject to speculation. A large number of shares are moved every day, all over the world, in order to obtain a capital gain from the sale of securities.

But listing on the stock market is subject to the risks of economic cycles , in addition to suffering the effects of psychological phenomena that are capable of raising or lowering the prices of securities and shares. Therefore, it is considered an instrument for measuring the impact of all those political, economic and social events that a society may go through.

This is how it becomes a barometer of the behavior of economies in countries around the world. That is its most representative importance.

What are the primary and secondary market?

The primary market and the secondary market are two types of trading and trading that differ from each other to a great extent. Taking this into account, we have the following definitions and differences:

Primary market

The primary market is the placement or launch of new shares. This means that they are the shares coming directly from the company, and that they are usually sold through an auction.

The sale occurs either in a public tender or direct negotiation. And if it occurs indirectly, when financial intermediaries interfere, it can be done in three ways, which are:

Firm sale : Regardless of whether all the shares are sold or not it is a closed deal, with a firm sale a number of shares is closed for a certain amount.

Stand-by Agreement : This is the most common form between several financial intermediaries that manage securities simultaneously. A preliminary agreement is concluded between the issuing company and the intermediary. The intermediary makes the sales in multiple batches and closes more share packages as he needs to expand the number of the company.

Best Effort : It is a direct sale on commission between intermediaries. The commission earned by the companies issuing these shares is a function of the sale price.

Gray Market : Its name is due to the fact that it deals with the use of certain parts of the market that companies do not use regularly. Although they are not illegal, it is an unexplored market, so the knowledge of their real result is uncertain.

Private Placement : They are issued shares that are located in the private market to one or more people privately but directly.

Secondary market

The secondary market is the market where the securities that have already been issued and sold in the primary market, are managed in real time by sellers and buyers. Something that occurs simultaneously and is executed by direct operations or corresponding financial intermediaries.

Therefore, the secondary market is the place where the buying and selling operations are carried out. It is these that transform the economic fabric and financial productivity from an investment and trust perspective.

What is traded in the stock market?

In the stock market, not only do we proceed to contract shares but also to negotiate other financial assets such as obligations, bonds and subscription rights. That is, all these financial assets that companies have decided to sell or negotiate for their financing needs.

Differences between fixed income and equities

These traded products are divided into two large groups called fixed income or variable income. The type of income will depend on whether the returns received by the investor are predetermined or not, respectively.

In fixed income you can find debt, and shares correspond to the second group, equities . This last modality is preferred by companies when it is necessary to obtain financing through the stock market.

There are also hybrid products that are a mixture of the above, as is the case of convertible bonds. They first generate a fixed interest and later transform into variable income securities. Another type is the obligations with warrants, with which the investor obtains the right to a premium or the conversion into another financial asset as well.

Therefore, when a person buys an equity security , a share in a certain company for example, he does not have the specific knowledge of the benefits that he will obtain. This situation occurs because you are not lending money to get it back, but with the purchase you become the owner of a part of said company. It therefore becomes a risky investment.

A situation opposite to that which occurs when an investor buys a fixed income security with a fixed interest rate. By doing this you know the kind of performance you will get with a predetermined time period.

It is important to note that in the financial market, not all listed equity securities have the same prestige . This is because they do not share the same income statements and neither do they share the same expectations. This is how some values will have more prestige than others if they are compared.

And it should also be noted that there are

Ordinary shares and preferred shares

Ordinary shares are titles that do not have any type of special right that is further from those provided by law and equally in the bylaws of the company. Ordinary shares are those that are capable of conferring the same rights to all their owners without there being any kind of distinction.

For their part, preferred shares are those that grant their holders or owners some kind of special right. As an example, it can be cited that if a corporation falls into bankruptcy, it will be the shareholders and owners who will be paid last. This is because the creditors are ahead of them and within the shareholders, the preferred securities are free to collect before the rest.

Stock market participants

A fairly extensive participatory system is developed in the securities markets that includes multiple factors. This is how the main participants in this market are:

Issuers of securities

Issuers of securities represent those companies or trusts that offer securities issues for sale with the purpose of capturing savings from the investing public. This is to finance your investments or also obtain working capital.

Issuers can be fixed income or variable income. Fixed-income issuers are securities issued by public companies or public institutions and represent loans that they receive through investors. They confer nothing but economic rights.

This type of securities determines your interests based on various indicators; other interest rates such as TBP, Prime, Libor, etc .; stock indices such as S&P, DOW, IBEX, CAC, etc .; coupons; zero coupon; among others.

Equity issuers are those that are identified as being active in the aliquot part of a capital. Their performance is determined according to the benefits they obtain from the fund or the company. Examples of this are the shares and shares of investment funds.

Investment fund management companies

These are companies that serve to manage investment funds. They have people specialized in this field.

Stock Exchange

They are entities that provide means for the purchase and sale of securities, thus exercising positions of authorization, regulation, supervision and over the positions of the stock market. Its functions include:

establish purchase and sale procedures

carry out remote reviews of exchange taxes

provide the public with information on securities

ensure the transparency of price formation

Stock exchange stands

Stock exchanges are entities that are authorized to carry out intermediation activities in the stock market. Other of its functions are to buy and sell securities on behalf of its clients, manage individual investment portfolios and advise the investor in the purchase and sale of securities on the stock market.

Investors

Investors or investors are people who have resources for the acquisition of shares, obligations or other securities, and who are in search of obtaining profits from their investments.

Custodial entities

Custodial entities are responsible for providing services for the preservation of securities and cash in relation to them. It is also their mission to register their ownership. As well as the return to the holder, securities of the same issuer and the same characteristics that have been delivered for safekeeping.

Risk rating companies

Risk rating companies are the entities that are authorized to issue risk ratings for securities. These ratings are nothing more than technical and objective opinions about an issuer’s ability to pay. They are expressed through a scale of letters and numbers.

Price providers

When talking about price providers, one talks about public limited companies that are authorized to professionally provide calculation services, as well as supply valuation prices for financial instruments.

Trust companies

They are entities that have been created for the administration of trusts, which in turn are subject to the inspection of the financial superintendency.

Securitizing companies

These entities are in charge of managing special-purpose vehicles such as, for example, universals, securitization funds and trusts. Through which the corresponding securitization processes are structured.

Where to check the world stock market in real time

Nowadays, it is convenient to know and follow live what happens in the main stock exchanges around the world. Being able to observe the ups and downs of the stock market in real time is a method to locate yourself in the economic reality of the world.

There are many stock market articles and other resources to help potential investors learn about the stock market workings . Also the need for this kind of information about the stock market has made more and more sites offer these indexes.

These applications are highly varied and adapt to all kinds of needs. Some of the most prominent are:

Bloomberg: A financial news agency specializing in the stock market. Through its application you will have real-time access to the values, news of the stock markets and the capital market. Its graphics are very useful.

Yahoo! Finance : Users will be able to create a portfolio of securities with products with a higher or lower risk. So that you can make the decision to invest at the right time. It is a simple and simple application to use.

Google Finance : Another simple application that is recommended especially for beginners.

However, it is best to repeatedly visit several of the indicated pages. As well as verifying more than one of these applications, because by contrasting all this data, the best possible information will be obtained.