Download - Equity Market
Equity market is another name for a stock market.
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The term equity also refers to the value of someone’s ownership of a business,
property, or a shareholder’s partial ownership in a business.
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An equity is a stock or stock share not bearing fixed interest.
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In other words an equity’s value rises and falls with that of a company and its
shares. It does not pay guaranteed interest as with a bond.
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Use of the term equity market reminds us that a stock market investment is
owning shares of a company’s assets.
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An equity market is a public market where stocks are listed, bought, and
sold.
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An equity market, or stock market, has members who do the buying and selling.
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Everyone else pays a commission for this service in order to buy stock or sell
stock.
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Now, in the computer age, exchanges such as the NASDAQ are virtual and all
activity is in a computer system.
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This contrasts with the traditional “outcry” system of the New York Stock
Exchange (NYSE) where orders flow through a real person, a floor broker.
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Equity markets allow companies to raise money without borrowing.
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Rather than incurring debt the company sells ownership shares, giving away
future profits and giving a vote in the affairs of the company for each share.
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Although a public stock company may not incur debt by issuing stock, it always
runs the risk of a takeover.
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An outside party can purchase a sufficient number of stock shares to
control the company’s board of directors, name its own management
and take over the company.
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Besides allowing a company to raise money, equity exchanges offer very
liquid investments.
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Stocks are almost always easier to buy and sell and a clear market value than
real estate, for example.
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There are equity exchanges throughout the world.
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The New York Stock Exchange and NASDAQ are the two large American
exchanges.
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Canada has the Toronto Stock Exchange. European exchanges include the London
Stock Exchange, the Paris Bourse, and the Deutsche Börse.
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Asia has the Hong Kong Stock Exchange, the Tokyo Stock Exchange, the Bombay Stock Exchange, and the Shanghai Stock
Exchange.
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In Latin America there are the BM&FBovespa in Sao Paolo, Brazil and BMV, the Bolsa Mexicana de Valores.
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In the United States market indexes such as the S&P 500 help traders and
investors follow the market sectors.
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A problem with dealing in many equity markets outside of the United States is
the lack of transparency.
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The United States Securities and Exchange Commission (SEC) oversees American stock markets, helping to
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insure that illegal insider trading, for example, does not enrich some at the
expense of others.
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Although the SEC does not do a perfect job it provides an oversight that is sadly missing in many markets outside of the
United States.
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Even basic stock information may be lacking on some foreign exchanges.
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Unless the investor has excellent inside information in some foreign exchanges, the best stock market investing strategy
may well be to trade and invest at home.
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Trading in the equity market requires learning the basics of stock market
investing.
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As stock prices move up and down traders and investors buy stock and sell
stock in search of a profit.
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A day trader will buy and sell within a day, typically holding no stock positions
overnight.
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Long term investing engages in techniques like value stock investing in order to capture a stock at a low price and allow it to appreciate in value over
many years.
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