The stock market appears in the news every day because of every day it reaches at new end, either very low or very high. Every day new and new people invests money in the stock market. Some of them earn well but most of losing their money. Why they lost money because they don’t clear about how the stock market works.
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, then this article will open your eyes to a whole new world!
Here is a small story to make easy how the stock market works:
Once upon a time in a village, a man appeared and announced to the villagers that he would buy monkeys for $15.
The villagers seeing that there were many monkeys around, went out to the forest and started catching them.
The man bought thousands at $15 and as supply started to diminish, the villagers stopped their effort. He further announced that he would now buy at $30. This renewed the efforts of the villagers and they started catching monkeys again.
Soon the supply diminished even further and people started going back to their farms. The offer rate increased to $40 and the supply of monkeys became so little that it was an effort to even see a monkey, let alone catch it!
The man now announced that he would buy monkeys at $75! However, since he had to go to the city on some business, his assistant would now buy on behalf of him.
In the absence of the man, the assistant told the villagers. Look at all these monkeys in the big cage that the man has collected. I will sell them to you at $50 and when the man returns from the city, you can sell it to him for $75.”
The villagers squeezed up with all their savings and bought all the monkeys.
Then they never saw the man nor his assistant, only monkeys everywhere!!!!
Welcome to the “Stock” Market!!!!!