Ask a Query - Stock Market Fundamentals


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	Stock Market Fundamentals

People wishing to sell or purchase financial instruments can well do so by participating in the financial markets. They guarantee liquidity and form assets prices within demand and decrease operating expenses, which market participants bear.

Markets have two branches, one is of promissory notes and the other is of securities. Promissory notes are promissory instruments wherein the owners have the right to get a fixed sum of money in future. Securities, or stock market, are a provision where the issuer is bound to pay a certain sum of money after all promissory notes are sold off. Preference shares and converted bonds, referred to as instruments with fixed return, are securities belonging to promissory notes as well as securities.

Terms of instrument pay-off spell out a broader classification, the two primary ones being market of assets with high liquidity and market of capital.

As far as the stock market is concerned, purchasers of ordinary shares invest their funds into company-issuer and become the owners. The number of shares possessed dictates their prestige in the company. A company's part in the market and it's potential shares are divided into blue chips, growth stocks, income stocks and defensive stocks.

Blue chips are shares of large companies with annual return of 4 billion dollars, which pay regular dividends.

In Growth stocks, money is reinvested into modernizing and improving the company. Dividends are minimal and rare.

Income stocks are those of companies with stable earnings, which pay huge dividends to shareholders. Mutual funds are an example.

Defensive stocks>/b> are those in which prices stay stable when market falls. They minimize risks.

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