Many people are interested in the ins and outs of the stock market. For example, Shalom Lamm, the real estate investor and CEO of Operation Benjamin. He is very interested in keeping up with the stock market.
How the Stock Market Works
First of all, as far as investors are concerned the stock market begins with a brokerage house.
The Various Stock Exchanges such as the New York Stock Exchange and the NASDAQ sell stock in publicly traded companies. Only companies that are officially registered and are recognized to have followed all the rules are allowed to sell stock on the various stock exchanges.
However, generally, people do not buy stock directly from a company. There are a few that under special circumstances will allow you to buy stock directly, but 99.999 percent of the time stock has to be bought from a stock brokerage company.
To get a brokerage account where it’s possible to buy stock, a person generally must deposit a minimum amount of say $1,000 to $2,000. It all depends upon the company.
The object of course, is that every single day, according to the rules of the various exchanges, all accounts have to be paid for and cleared off the books and the broker
does not want to be the one that winds up paying the fee. The fees are deducted from your brokerage account.
How do the Exchanges Work?
Each Monday through Friday with the exception of holidays, the two principal stock exchanges open for trading at 9:30 a.m Eastern Standard time, and close for trading at 4 p.m.
When the opening bell rings, high-speed computers calculate the asking price of a stock (for those selling) and the bid price, for those willing to buy. Somewhere in between, there is an equilibrium.
Yesterday’s closing price, the last price for a stock transaction the day before is a big determiner of the opening asking price, but lots of events can take place overnight to cause either a sharp demand or a steep drop in a stock.
Anything overnight that causes investors like Shalom Lamm to worry about the overall state of the economy such as an agreement by the oil-producing states to restrict oil in the future or worries about a war can send a stock plummeting.
So can a rise in the Federal Reserve Rate or a negative report about quarterly earnings by an individual company.
So too, can positive events cause a sharp, temporary rise in the price of stocks.
For most people though, they are into stocks for the long run. It’s a proven fact that stocks generally appreciate at 7 to 10 percent of their value, although there may be a few bad years such as 2008 when the real estate market bottomed out.
Overall, there are few investments safer than stocks, particularly if you hold onto them for a while. Of course, an investor’s mileage may vary so do plenty of research before deciding to invest in anything including stocks.