Teacher Guide to Stock Market
A "stock market" is nothing more than a market, or "exchange", where stocks are bought, sold, or traded. There is no physical "stock market" - in fact, there are a variety of stock exchanges around the world (e.g. the New York Stock Exchange (NYSE), NASDAQ, the London Stock Exchange (LSE)), any of which could accurately be referred to as a stock market. Stocks exchanges can be "listed" (meaning they have a physical place) or "virtual" (meaning that all trading is done virtually).
WHAT IS A "STOCK"?
Stock refers to a share in a company. You can buy the stock of an individual company or you can buy stock in a fund. Funds are nothing more than large volumes of stock of various companies that are packaged together and sold in shares.
HOW DID STOCK MARKETS START?
Stock markets have been around since the 16th century. In fact, it was stocks that financed the Pilgrim's voyage to America. These early markets were similar to farmers markets today - they were held in open-air lots and people had to physically go there and actively buy/sell/trade their stocks. By the 18th century, some of the trading had made its way indoors, into the back rooms of coffeehouses and the parlous of homes.
WHY DO COMPANIES ISSUE STOCK?
Companies issue stock so that they can get money to finance their operations or ventures. While they could simply borrow the money from a bank, this would mean assuming debt, paying interest, and having to make payments. With stock, they can get the money they need without having to make those types of commitments.
WHY DO PEOPLE BUY STOCK?
Having stock means owning a share of that company; in this way when you buy stock, you can said to be a "shareholder" of the company (in the case of a fund, the fund would be the shareholder). As the company earns money, so do you; because you own a share of the company, your share goes up in value with the value of the company. People buy stock so that they can resell it later at a higher price.
BEARS VS. BULLS
Two words you may hear regarding the stock market is "bull" and "bear". A "bear" market is one where stock prices have been going down, generally meaning that stocks are undervalued and it is a good time to buy. A "bull" market is the opposite; it means that stock prices have been going up so, stocks are overvalued and it is a good time to sell.
Related Teacher Resources That Are Worth A Look:
- Doing Your Corporate Homework
- Market Radar
- Reading The Language Of The Street
- Stock Market Web Quest
- Stock and Who Owns McDonalds?
- The NASDAQ Stock Market
- Ups And Downs Of The Stock Market
- What's My Name?
- What's My Symbol?