What is the equity market? If you’re looking for investment advice Perth, should you be looking into equities along with more known options like stocks and real estate?
First, let’s take a look at what the equity market is so everyone is on the same page. An equity market is where shares are issued and traded, usually through exchanges. Yes, this is the stock market under a different name. It’s a vital part of the economy.
Equity markets are a meeting point, of sorts. Buyers and sellers of stocks come together, trading securities in public stocks or private trade.
Trading in the market goes thus. An investor bids for stocks by offering a price and sellers ask for a specific price. When these two match, you have a sale. In other words, it’s just like how buying and selling work anywhere else. You’ll probably be competing with other investors at the same time.
In practice, the first investor to place a bid is the first to be given stocks.
If a buyer is willing to pay any price for the equity, it’s called buying at market value. If the seller is willing to take any amount for the stock, they’re selling at market value.
Why do companies sell stock?
A stock is largely sold to generate capital. The capital is then used to grow the operations, in exchange for giving people a small part in the ownership of the company. If a company does well, the value of that ownership increases. Stock prices rise and they see a profit.
Some people prefer to buy and sell stocks quickly and easily, using the daily shifts in value to generate incremental gains. Others hold on to stocks like an investment, particularly if the company is an up and comer or is a firm that is in high demand.
Most of this trading occurs in a stock exchange. Contrary to popular belief, this is not the chaotic trading floor you see in the movies.
There’s plenty around the world, and they can be either physical locations or virtual ones thanks to modern technology. Electronic exchanges often include market makers, which is a broker-dealer firm that buys and sells. They’re there to facilitate the trading of specific stocks.
Electronic trading is becoming more common nowadays, due to the convenience. In fact, they are the more preferable method these days. They make the process smoother than physical exchange. It’s also possible to find a hybrid market, where the two methods are integrated.
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