•In
the largest city in many countries around the. world, you may want to visit the
stock exchange. There are stock exchanges in Paris, London, Tokyo, Toronto, and
many other places. One of the largest, most famous, and most important stock
exchanges in the world is located in New York City.
•Perhaps
you can guess what happens at a stock market from its name. It is called a
market because it is a place where some people sell things and others buy
things. An exchange of things takes place. The things that are exchanged at the
stock market are shares of stock in businesses or companies. The shares
represent partial ownership of the company. In other words, if you buy shares
of stock in a business, you become a partial owner of the business. The stock
market or stock exchange, then, is a place where people can buy or sell shares
in a particular company or business.
•Investors
who buy shares of stock in a company may make money in two ways. They may begin
to make money right away. Suppose that a person invests in a company, and the
company makes money. The company shares this money with the investor. This
money that is shared is called a dividend. Dividends are usually sent to
investors once every three months while they own the stock. A second way that
investors may make money is to sell the stock at a higher price than they paid
when they bought it. The price of each share of stock goes up ¡f the company
does very well. It may also go up for many other reasons. But when it does go
up, a person may sell it and make a profit.
•The
process of investing money in the stock market is Somewhat more complex than
this, But for everyone who wants to invest money in the market, the process ¡s
basically the same. Almost all stock markets work the same way. In each
country, of course, there are special laws for the stock market, 10 make sure
that everyone has a fair chance to make money by investing.
•The
company may do badly. Then the stock will go down, and the investors will lose
money. The stock may go up or down for a number of very complex reasons.
Everyone wants the stock market to go up, but sometimes even when a company
does well the stock may go down. This is usually true for all stocks.
EXERCISES
1)List
three cities which have stock exchanges.
2)What
happens at a stock exchange?
3)Who
buys stock?
4)Why
do people buy Stock?
5)Why
do companies sail stock?
6)Explain
what dividends are.
7)What
is a broker?
8)Explain
why Mr. and Mrs. Smith's investment is a good one.
9)Why
is investing money in the stock market a gamble?
Do all stocks always go up?
Do all stocks always go up?