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What is the stock market?

Posted by  manoj pandey   in       1 year ago     1158 Views     Leave your thoughts  


What is stock market?

The Stock market is a location where you have the opportunity to a buy a share of a publicly traded company.

The stock price that is a representative piece of the business and If you were able to buy all the stocks you would own the entire company.

However, in reality it will be difficult because of stock price is ever changing. The more shares you buy, the more upward pressure you put on the stock price and the more expensive each share becomes.

To understand it better we are going to share an example of a company (Coco Cola).

The company has its share price $46.60 with its outstanding shares is 4.33 Bn. Currently company worth is $201 billion (Bn) which is generated by formula:

Net Capital = Outstanding shares (OS) x Share price (SP)

It signifies that if you have 201 Bn and you want to buy or attempt to buy shares at that price you would probably push share price up. As you buy more and more shares, shares become more expensive because of the lack of shares available on the market and the reluctance of some individuals or companies selling their stake.

Promised revenue or profits

Buying shares is buying part of the business, therefore it is buying ownership. However, promised revenue or profits depend on your overall strategy. Some businesses pay dividends that means you should get certain amount of money for every share you hold over a certain period of time.

While other people are engaged in the stock market and want to make profits from price movement, meaning they buy shares cheap and sell it when its price is increased.

In this strategy your profits are made on the difference between how much you bought the share for and how much you have sold it. Sometimes this can be a loss

Our strategy at learnbigbiz.com

We follow a strategy to buy and hold share forever, which is known as dividend investing. It is a long term strategy in excellent durable businesses with excellent profit margins. These businesses always pay dividends which increase with time through increasing revenue. That will finally increase earnings per share and generate dividend revenue over the long term. That will in turn used to buy shares of same company or different company or allows investors to spend money which suits them.

Why this strategy

At learnbigbiz.com we use this strategy in the stock market because it is a long term strategy that ensures we invest our money safely and assures we receive more and more money as time goes by. Time is an important factor because time lost is never gained. Both money and time are correlated depending how you make money and it is especially worse if you are employed. The strategy helps in keeping our money generating at a percentage higher than inflation depending on the company and how earnings are growing.

This ensures we get wealthier as time goes by

When to sell a stock

Selling a stock depends on certain factors such as:

Sell a stock if it overvalued/overpriced by the stock market

At learnbigbiz.com we can do this by Price/earnings ratio also known as PE ratio.

When this ratio is high and we have another stock to buy we would sell the stock. However, we normally sell stock when we have better stock to buy.

However, some clients may sell their stock as they like for any other purpose they may wish to pursue.

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