The stock market is part of the capital market which brings together the demand and supply of capital. Suppliers of capital are those who are looking for a profitable use for their savings. This group is often represented by financial intermediaries like banks or funds, which make the pooled financial resources available to the capital market. The demand for capital is usually represented by companies or other institutions that need funds to finance investment projects.
Companies requiring additional financial resources have the choice between two main forms of financing on the capital market to fund their projects:
From an economic point of view, share investments are one of the most suitable means of fairly distributing entrepreneurial prosperity within society. Everyone is free to invest in the incorporation that he or she considers to be the most reasonable and promising investment and with a little care and foresight a small stock investment can turn into a considerable fortune.
Quite a few stock corporations that were first listed on the stock exchange just ten years ago for a few cents are now quoted at values of several hundred US- dollars. On the stock exchange there is the opportunity to create the basis for later waelth by the acquisition of suitable shares.
Of course, not every stock purchase can be a bull's eye, but that is not necessary to create wealth in the long-term because with shares the basis for a steady income can be created.
Making money work for you is the art of investing and shares are a suitable means of achieving this. Those who forgo consumption today, save their funds and invest wisely will be able to profit tomorrow. The stock market offers everyone who understands this basic rule a gigantic pool of investment opportunities and sources that provide one with the knowledge and information he needs to make the right choices.
Like everything else in the world, stock trading, despite all this, involves not only opportunities but also risks. Accordingly, investors should always inform themselves and act with caution in their investment decisions.
The most important opportunities and risks at a glance:
In line with the issuance of shares, companies can opt for quite different classes of shares, which confer different rights on the shareholder. The most important rights in connection with shareholding are listed below:
With few exceptions, nowadays shares are generally not traded physically but deposited in electronic form with depositaries. Shares are purchased via banks or brokers where investors have their custody accounts. Their trading systems are linked to the stock exchanges via electronic data processing systems, which are then used to process buy and sell orders (securities orders) from market participants.
There are numerous stock exchanges and brokers, and not every stock can be purchased through every broker or stock exchange. Where the particular share can be traded is determined when the share is issued. Therefore the stock market is not a centrally organized institution, but consists of many trading facilities and institutions located in many different places, interconnected via electronic systems. Together with the market participants, they constitute what is commonly understood as the stock market.
The regulation of national stock markets is essentially the responsibility of the respective national institutions, such as the U.S. Securities and Exchange Commission (SEC). Their tasks include the control of trading and compliance with the legal framework with the purpose of protecting shareholders and preventing illegal practices.
Companies wishing to use the U.S. capital market must register with the SEC. Raising funds on the capital market through a share issuance and the associated listing on a U.S. stock exchange is only possible in the context of registration and admission with the SEC.
