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Stock Exchange in Finance

What is Stock Exchange?

Stock exchange, as the words depict is the transaction or the sale or purchase of stock and other financial instruments. You can also consider it as a continuous auction market, where the listed companies, trusts, and other investors perform relentlessly. In the early days, these practices used to take place at a particular location. Now, it is also known as an electronic trading platform.

Importance of Stock Exchange-

  • It plays a significant role in providing credit to various companies, on a different level.
  • The companies are increasing their capital by offering their shares to the investing public.
  • The liquidity of the investors depends upon the boom and depression of the stock market. But it not only ends there, that people come and place your bets here and the profits home- if you are lucky enough.

Why one should possess the knowledge of Stock Exchange-

You need to be aware of the recession, and its other instruments. It can get taken as a short-term investment. It can be mainly termed as ‘gamble because one can either build a palace after the investment or be on the road, within the blink of an eye. But, as we know that the more knowledge you have, the more merger it is. So, the more you learn about stock and stock market, the better it will be for you to manage your money. Most people will fear to invest their hard-earned money. But after a little knowledge, it can be intimidating, and one can overcome its fears of investing. 

Aftermath of investing in Stock Exchange: 

Now, let’s go through what happens after you invest in the shares. You place your bets on a particular company shares, and that suffices fraction of the company’s assets will belong to you. Now the question arises that if a company is borrowing money from an investor, then the loan comes with interest. So that particular investor will earn comparatively more and better profits, i.e., if the market is booming.


Let’s finish it off with an example: suppose you want to open a restaurant and have half of the capital required in investment. But the other half, you want to manage from outside. So, what people do is they make the shares of their assets and start attracting people to invest money in their venture. Now from where that trust will build, is upon the convincing power of the people involved. And after the company earns profit, that number of shares will be liquefied into money, and the concerned parties will get their respective shares. You can also tune it as the long-term loan process, but then, the loan has to get repaid in a fixed amount of time and that too, with a considerable percentage of interest. Hence, the stock exchange does not only include the sale and purchase of securities.

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