What is the Stock Market and its functions?
A stock exchange or stock market is a center where traders buy and sell shares of companies. Companies want their shares to be listed on the stock market. A large company usually lists its shares on many stock exchanges around the world.
Now comes the point of what shares are: shares are a small part of a company, when someone buys shares in a company, it means that the buyer owns a small part of that particular company. Stock price based on many different things. The main thing that affects the stock price is the balance between demand and supply. Let us know how it affects, if so many traders want to buy a stock then the price of that stock goes up and if there are more sellers then the price of that stock goes down.
Stock Market Functions
• Securities Prices: The stock market provides the platform to obtain the values of securities based on supply and demand factors. The values are valued higher as there is more demand, in this way the price of the securities is determined, the higher the demand, the higher the value of the securities. Investors can know the value of their investments as well; stock valuation is very useful.
• Transaction Security: Each stock market is an organized market and has its own law. Every member must follow the rules, similarly, the companies must also follow the strict rules and regulations. This will ensure the safety of buying and selling through the stock exchange.
• Contributes to economic growth: the securities of many companies are bought and sold on the stock market, investors can buy securities to make a profit and can sell when they need money. These investment processes encourage investors to invest their money in industries, thus making economic development possible.
• Diffusion of the cult of equity: The stock market plays a fundamental role in encouraging investors to invest in property titles. The stock exchange guides investors by providing economic updates, usually this information is published, providing investment knowledge and providing best trading practices and much more.
• Provide room for speculation – When investors buy shares for a profit as a result of changes in the market price of those shares, it is called speculation. Some scope for speculation must be allowed to provide liquidity to securities, the stock market provides this facility.
• Liquidity: The main function of the stock market is to provide a platform to buy and sell shares and through these investors obtain the security that they can convert their investment into cash whenever they want. Therefore, investors invest in long-term investments without hesitation because they can convert them into short- and medium-term investments whenever they want.