How does the stock market work ?? #stocks

Hitvibes Studio

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00:00In the 1600s, the Dutch East India Company employed hundreds of ships

00:11to trade gold, porcelain, spices, and silks around the globe.

00:16But running this massive operation wasn't cheap.

00:19In order to fund their expensive voyages, the company turned to private citizens,

00:24individuals who could invest money to support the trip

00:27in exchange for a share of the ship's profits.

00:30This practice allowed the company to afford even grander voyages,

00:34increasing profits for both themselves and their savvy investors.

00:39Selling these shares in coffeehouses and shipping ports across the continent,

00:44the Dutch East India Company unknowingly invented the world's first stock market.

00:50Since then, companies have been collecting funds from willing investors

00:54to support all kinds of businesses.

00:56And today, the stock market has schools, careers, and even whole television channels

01:02dedicated to understanding it.

01:03But the modern stock market is significantly more complicated

01:07than its original incarnation.

01:09So how do companies and investors use the market today?

01:14Let's imagine a new coffee company that decides to launch on the market.

01:18First, the company will advertise itself to big investors.

01:22If they think the company is a good idea,

01:24they get the first crack at investing and then sponsor the company's initial public offering,

01:29or IPO.

01:31This launches the company onto the official public market,

01:34where any company or individual who believes the business could be profitable might buy a stock.

01:40Buying stocks makes those investors partial owners in the business.

01:43Their investment helps the company to grow, and as it becomes more successful,

01:48more buyers may see potential and start buying stocks.

01:51As demand for those stocks increases, so does their price,

01:55increasing the cost for prospective buyers,

01:58and raising the value of the company's stocks people already own.

02:02For the company, this increased interest helps fund new initiatives,

02:06and also boosts its overall market value,

02:09by showing how many people are willing to invest in their idea.

02:13However, if for some reason a company starts to seem less profitable,

02:17the reverse can also happen.

02:19If investors think their stock value is going to decline,

02:22they'll sell their stocks with the hopes of making a profit,

02:25before the company loses more value.

02:27As stocks are sold and demand for the stock goes down,

02:31the stock price falls, and with it, the company's market value.

02:35This can leave investors with big losses,

02:37unless the company starts to look profitable again.

02:41This seesaw of supply and demand is influenced by many factors.

02:45Companies are under the unavoidable influence of market forces,

02:49such as the fluctuating price of materials,

02:51changes in production technology,

02:53and the shifting costs of labor.

02:56Investors may be worried about changes in leadership,

02:58bad publicity,

02:59or larger factors like new laws and trade policies.

03:03And of course, plenty of investors are simply ready to sell valuable stocks

03:07and pursue personal interests.

03:09All these variables cause day-to-day noise in the market,

03:13which can make companies appear more or less successful.

03:16And in the stock market, appearing to lose value

03:19often leads to losing investors,

03:21and in turn, losing actual value.

03:23Human confidence in the market has the power to trigger everything

03:27from economic booms to financial crises.

03:30And this difficult-to-track variable is why most professionals

03:34promote reliable long-term investing over trying to make quick cash.

03:38However, experts are constantly building tools in efforts

03:41to increase their chances of success in this highly unpredictable system.

03:46But the stock market is not just for the rich and powerful.

03:49With the dawn of the Internet, everyday investors can buy stocks

03:52in many of the exact same ways a large investor would.

03:56And as more people educate themselves about this complex system,

03:59they too can trade stocks, support the businesses they believe in,

04:03and pursue their financial goals.

04:05The first step is getting invested.

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