What is Stock Market and How Does It Work

What is a Stock or Share?

When you're going to buy a stock or share, you are buying a piece or a part of the company. When a company needs to raise money, it issues shares to the investor. This will be done via an initial public offering (IPO), which the price of shares is set based how much the company is estimated to be worth, and how many shares are being issued. The company gets to keep the money raised to grow its business, while the shares (also called stocks) continue to trade on an exchange, such as the Philippine Stock Exchange.

How Does it Work?

There are lots of people who get scary when it comes to stock market, because they don't know what's really the true nature of stock market. There are people who think that investing in the stock market are gambling. But when you know how stock market works, it will make you interested to invest in a right manner. 

By the way, the common questions are "What is stock market? How does it work?" I will be explaining how the stock market works. 

There are 2 types of people in the stock market: the Trader and the Investor. 

The trader is a person who invest money in a short term, which means they are the ones who buy stocks today and sell it tomorrow or on the other week. These people use the "Market Timing" strategy. 

On the other hand, the Investor is a person who invest in the stock market in a long term, which means they are the people who invest or buy stock today and sell it for 20 years or more. They are the people who use "Buy and Hold" strategy.