“One of the funny things about the stock market is that every time one person buys, another sells, and they both think they are astute.” – William Feather
What is the Stock Market?
Why should you care? Who even knows?
Well me actually, that’s why I am the guy writing the article.
The Stock Market is the cornerstone of the modern market, and is nothing more than a gigantic internationally networked marketplace where enormous sums of money are transported back and forth. In total, about A$89 Trillion is traded every year, which is slightly less than the value of all actual goods and services produced by the world economy.
Now you ask, “What is traded on it? Is it second-hand potatoes? Is it Cheese-Wheels?” The actual answer is stocks, or shares, or whatever you’d like to call it. (You can call it “puffles” for all I care).
Companies issue “shares” to earn money, and in return these “shares” give you part ownership of the company. Companies issue shares because it helps them gain influence on bigger projects, and in turn the investors can earn from the company’s success. So for example, Facebook was able to raise around $16 billion during their initial public offering (IPO), where they issued shares and people bought them, trusting Facebook’s business model to prove very profitable in the future. And guess what, Facebook has made massive profits! Their share price has risen by around 240% since their IPO, which is from about $38 to $130.
Now why should we care about the stock market?
In 2008, we entered a global financial crisis and everyone paid a price – people lost their jobs, their houses, and their savings. Paying close attention to the stock market assists you in navigating the dangers of a recession, as it’s usually the stock exchange that falls first, before any other market (real estate or anything else). Paying some attention, and knowing what to look for, can save you.
In everyday circumstances, the stock market also influences the price of our most beloved coffee, the petrol you fill up your car with, and your potatoes and wheat. Basically just about everything.
Along with impacting the price of every product we encounter, the stock market provide a special lens, through which you can look and realise that everything is connected, sort of like neurons in the brain. For example, Saudi Arabia oversupplied oil in the global market, thus reducing oil prices. As a result of this, Indian construction companies (which are a part of a rapidly developing economy) can now complete construction at a cheaper price. So the takeaway from all this for investors is to start investing in Indian construction companies.
Physically speaking, the stock market doesn’t have the reputation of being just like any other ordinary market. People generally envision trading floors with people aggressively yelling “buy” and “sell” at each other, packed in together in a huge room, with handfuls of pieces of paper clamped in their sweaty hands. Though we have since moved on from this model, to electronic trading systems, the stereotype of the Wall Street atmosphere that is so renowned in popular culture, demonstrates that the industry is bursting with tradition and culture.
What I am trying to get to is that the stock market is a place of chaotic beauty that impacts every aspect of our lives, from the price of a pumpkin-spiced latte, to which leaders we vote for. An understanding or consideration of the stock market is just a deeper understanding of every choice you make, and why you make them.