If the trend is up, it's a bull market. If the trend is down, it's a bear market.
The market in which shares are issued and traded either through exchanges or over-the-counter markets. Also known as the equity market, it is one of the most vital areas of a market economy as it provides companies with access to capital and investors with a slice of ownership in the company and the potential of gains based on the company's future performance.
In the Philippines, the market is called the Philippine Stock Market, most commonly known as the Philippine Stock Exchange or simply PSE, with an index called PSEi.
FUNCTION AND PURPOSE
The stock market is one of the most important sources for companies to raise money. This allows businesses to be publicly traded, or raise additional financial capital for expansion by selling shares of ownership of the company in a public market.
An economy where the stock market is on the rise is considered to be an up-and-coming economy. In fact, the stock market is often considered the primary indicator of a country's economic strength and development.
Two ways to make your money grow in the stock market are:
1. Through an increase in stock price or capital appreciation.
Capital appreciation is an increase in the market price of your stock. It is the difference between the amount you paid when buying shares and the current market price of the stock. However, if the company does not perform as expected, the stock price may go down below your purchase price.
2. Through dividends declared by the company.
Dividends are paid out to shareholders, representing earnings of the company that are not going to be reinvested in their business.
BASIC TERMS
STOCK - is a share in the ownership of a company. Stock represents a claim on the company's assets and earnings. As you acquire more stock, your ownership stake in the company becomes greater. Whether you say shares, equity, or stock, it all means the same thing.
COMMON STOCK - when people talk about stocks they are usually referring to this type. In fact, the majority of stock is issued is in this form. Common shares represent ownership in a company and a claim (dividends) on a portion of profits. Over the long term, common stock, by means of capital growth, yields higher returns than almost every other investment.
PREFERRED STOCK - a class of ownership in a corporation that has a higher claim on the assets and earnings than common stock. Preferred stock generally has a dividend that must be paid out before dividends to common stockholders and the shares usually do not have voting rights.
INVESTOR - any person who commits capital with the expectation of financial returns.
DIVIDEND - a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
BULL MARKET - a financial market of a group of securities in which prices are rising or are expected to rise. The term "bull market" is most often used to refer to the stock market, but can be applied to anything that is traded, such as bonds, currencies and commodities.
BEAR MARKET - a market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment to be self-sustaining. As investors anticipate losses in a bear market and selling continues.
The use of "bull" and "bear" to describe markets comes from the way the animals attack their opponents. A bull thrusts its horns up into the air while a bear swipes its paws down. These actions are metaphors for the movement of a market. If the trend is up, it's a bull market. If the trend is down, it's a bear market.
