The term “stock market” refers to the business of buying and selling stock. It is a market for the trading of company stock and derivatives of it. Both of these are securities listed on a stock exchange as well as those only traded privately.

Bonds are still traditionally traded in an informal, over the counter market known as the bond market. The worldwide size of the bond market is estimated at $45 trillion and the size of the stock market is estimated as about half that.

In the stock market, the participants range from small individual stock investors to a large hedge fund traders, who can be based anywhere. Usually their orders end up with a professional at a stock exchange, who executes the order.

The purpose of stock exchange is to facilitate the exchange of securities between buyers and sellers, thus providing a marketplace. The exchanges provide real time trading information on the listed securities, facilitating price discovery.

You might wonder why should you care about the stock market. May be you are too young to be investing, or can’t see the market relates to your everyday life. But, the fact is that if you have no money in the stock market, or are in school, the stock market does affect you. It affects everything you do from going to the mall to buying a new outfit.

The stock market is considered to be one of the most vital sources for companies to raise money. This allows businesses to go public or raise additional capital for expansion. The exchange provides liquidity that affords investors to quickly and easily sells securities. This is a good feature of investing in stocks compared to other less liquid investments such as real estate.

The price of the shares and other assets is an important part of the dynamics of economic activity and can influence or be an indicator of social mood as shown in history.

Rising share prices for example, tend to be associated with increased business investment and vice versa. The wealth of households and their consumption is affected by share prices.

The fluctuations in the stock market occur partly because companies make money or lose money, but it is much more involved than that. The worth of a stock is what someone will pay for it.

There are many factors that have an effect on the stock market such as the state of the economy. If there is more money floating around, there is more flowing into companies making their prices rise. Another factor is time of year and publicity. Many stocks are seasonal which means that they do well during certain parts of the year like the ice company, which does well during summer.

Mistakes to be avoided by investors to make money in the stock markets

1. Don’t buy a stock based on its past experience

2. Beware of Stock Market experts

3. Never be unrealistic with your expectations

4. Understand the consequences of failure on your portfolio

For more details please visit www.wealthcapfund.com

Mark Plummer
http://www.articlesbase.com/Investing-articles/stock-market-versus-investment-funds-135389.html