 The stock market makes an appearance in the news every day. You hear about it when it reaches a new high, in headlines like "The Karachi Stock Exchange Average rose 50 index points today", when a certain stock plummets, or when the political scenario changes.
Obviously, stocks and the stock market are important, but you may find that you know very little about them. What is a stock? What is a stock market? Why do we need a stock market? Where does the stock come from to begin with, and why do people want to buy and sell it? If you have questions like these, you've come to the right place.
Welcome to a whole new world.
The Basic Idea
Stocks in publicly traded companies are bought and sold at a stock market (also known as a stock exchange). The Karachi Stock Exchange (KSE) is an example of such a market.
In your neighborhood, you probably have a supermarket that sells groceries. The reason you go the supermarket is because everything you need to run your home is available under one roof. It's far more convenient than having to make 10 stops at different stores.
The KSE is a supermarket for stocks. The KSE is like a big room where everyone who wants to buy and sell shares can go to conduct their transactions.
The Exchange makes buying and selling easy. You do not have to actually travel to the Stock Exchange; rather, you can call a stock broker who does business with the Exchange, and he or she will go there on your behalf to buy or sell your stock. With an Exchange in place, you can buy and sell shares instantly.
The Stock Exchange has an interesting side effect. Because all the buying and selling is concentrated in one place, it allows the price of a stock to be known every second of the day. Therefore, investors can watch as a stock's price fluctuates based on news from the company, media reports, economic news and a range of other factors. Smart buyers and sellers take all of these factors into account before making decisions. |
