yego.me
💡 Stop wasting time. Read Youtube instead of watch. Download Chrome Extension

How The Stock Exchange Works (For Dummies)


3m read
·Nov 2, 2024

What is the Stock Exchange and how does it work? The Stock Exchange is nothing more than a giant globally network tend to organize the market place where every day huge sums of money are moved back and forth. In total over sixty trillion (60,000,000,000,000) Euros a year are traded. More than the value of all goods and services of the entire world economy. However, it's not apples or second hand toothbrushes that are traded on this marketplace. But predominantly securities.

Securities are rights to assets, mostly in the form of shares. A share stands for a share in a company. But why are shares traded at all? Well, first and foremost the value of a share relates to the company behind it. If you think the value of a company in terms of a pizza, the bigger the overall size of the pizza, the bigger every piece is. If, for example, Facebook is able to greatly increase its profits with a new business model, the size of the company's pizza will also increase, and as a result, so will the value of its shares.

This is, of course, great for the shareholders. A share which perhaps used to be worth 38 euros could now be worth a whole 50 euros. When it's sold, this represents a profit of twelve euro per share! But what does Facebook gain from this? The company can raise funds by selling the shares and invest or expand its business. Facebook, for example, has earned sixteen billion dollars from its listing on the Stock Exchange.

The trading of shares, though, is frequently a game of chance. No one can say which company will perform well and which will not. If a company has a good reputation, investors will back it. A company with a poor reputation or poor performance will have difficulty selling its shares. Unlike a normal market in which goods can be touched and taken home, on the Stock Exchange, only virtual goods are available. They appear in the form of share prices and tables on monitors.

Such share prices can rise or fall within seconds. Shareholders, therefore, have to act quickly in order not to miss an opportunity. Even a simple rumor can result in the demand for a share falling fast, regardless of the real value of the company. Of course, the opposite is also possible. If a particularly large number of people buy weak shares because they see, for example, great potential behind an idea, their value will rise as a result. In particular, young companies can benefit from this.

Even though their sales might be falling, they can generate cash by placing their shares. In the best-case scenario, this will result in their idea being turned into reality. In the worst-case scenario, this will result in a speculative bubble with nothing more than hot air. And as the case with bubbles, at some point, they will burst.

The value of Germany's biggest thirty companies is summarized in what is known as the DAX share index. The DAX shows how well or poorly these major companies and thereby the economy as a whole are performing at the present time. Stock Exchanges in other countries also have their own indices. And all of these markets together create a globally networked marketplace.

Subtitles by the Amara.org community.

More Articles

View All
What Exactly is the Present?
At the 1939 world’s fair in New York, the exciting new tech was the live television broadcast. Roosevelt became the first president to address the nation live on TV. But for years leading up to this event, engineers have been working on one particular tec…
The future of YouTube: Is it slowly getting worse and becoming too “Advertiser Friendly?”
What’s up, you guys? It’s Graham here. So this video is gonna be entirely different from anything else I’ve ever uploaded. It’s not about real estate, it’s not about money, it’s not about mindset. I’m talking about YouTube today and why they’re going thro…
10 Stocks the Smart Money is Buying for 2021
[Music] Hey guys, welcome back to the channel! In this video, we’re going to be talking about the top 10 most bought stocks by the big investors of the world as we lead into 2021. You might ask, “Well, how the hell do you know that, Brandon?” And the reas…
Safari Live - Day 210 | National Geographic
This program features live coverage of an African safari and may include animal kills and carcasses. Viewer discretion is advised. Hello everyone, whoever you are in the world, and a very warm welcome to our sunset Safari Drive all the way from Masai Mar…
Insurance-funded stateless military: a defense
Fringe elements posted a video recently explaining the difficulties with different proposals for how a stateless society will deal with military defense. He looked at militias, PDAs, and drew a nuclear arsenal insurance agencies, and explained problems wi…
Eric Migicovsky - How to Talk to Users
Hi everyone, my name is Eric Richard Kazuki. I’m a partner here at YC. I actually started a company that went through Y Combinator back in 2011. I started a company called Pebble; we made one of the first smartwatches. I am really excited to be here to t…