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2024-03-14

Stock Trading

The content we are discussing today is important for each of us.

Many people have a stereotyped impression when they hear about stocks, but most things have multiple facets.In real life, most people do not invest in stocks, and most people are not suitable for stock investment.

 

However, we need to learn about investing, such as investing in funds and bonds, so it is very necessary for us to have an objective and comprehensive understanding of the stock market.

 

 

The Birth of Stocks

At the end of the 16th century, a Dutch merchant ship was sailing on the Indian Ocean, loaded with spices such as cloves and pepper.

 

This was a highly profitable voyage. At that time in Europe, spices were very valuable commodities, while in Asia, they were very common commodities.Thus, merchant ships obtained inexpensive spices from Asia and transported them to Europe to sell at high prices, making such long-distance voyages inevitably a lucrative maritime adventure.

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Due to the enormous profits, more Dutch merchant ships joined this long-distance trade. We should all know that there are very few businesses in the world that are guaranteed to make a profit without any losses.

At sea, there may be risks such as storms, pirates, and running aground, and each risk could turn the results of the voyage into nothing.

In addition, with the increase in merchant ships engaged in long-distance trade, competition in the market has also emerged, leading to a decline in profits.At that time, the United Kingdom also discovered that oceanic trade could bring huge benefits, so it quickly assembled an ocean-going fleet for maritime trade, which intensified the competition.

In this situation, the Dutch politician John Oldenbarnevelt proposed at that time:

All Dutch merchant ships stop malicious competition, and everyone join together to form a large merchant team to share risks and benefits.

Thus, we had the world's first joint-stock limited company:

The Dutch East India Company.Due to the substantial capital costs required for oceanic trade, coupled with the significant risks involved, the Dutch East India Company at that time began to raise funds from the Dutch public.

The company promised that anyone who invested money could become a shareholder, sharing in the profits and risks of oceanic trade.

Each participant would receive a corresponding number of shares based on their investment proportion and would be given a certificate as proof, which is known as a stock.

Dutch East India Company issued stocksAt that time, those who held shares could receive the dividend income from the company's overseas trade, which was quite considerable. As a result, many Dutch citizens bought these shares at that time.

The East India Company thus raised a lot of money, expanding the scale of overseas trade voyages and maritime business, greedily making wealth and profits.

The invention of stocks also made the 17th century a glorious era of Dutch great navigation.

Securities Exchange

The shares issued by the Dutch East India Company at that time required a certain period of holding to receive dividends, but some shareholders could not wait for so long.Thus, in 1609, the Netherlands established a stock exchange specifically for trading stocks, which was the world's first stock exchange:

 

"Amsterdam Stock Exchange"

 

This allowed investors holding shares in the Dutch East India Company to freely trade stocks in the exchange.

 

Later, the Industrial Revolution erupted in 18th-century Britain and quickly spread throughout Europe, with a large amount of manual labor being replaced by machinery.The advancement of technology has led to an explosive increase in productivity, and many companies require substantial funds to purchase machinery, expand factories, and broaden their development.

However, they all face a very direct problem—lack of funds.

Many places have started to follow the Dutch model by establishing stock exchanges to help businesses issue shares and raise money from the public for corporate expansion and development.

Thus, against such a backdrop, the stock markets of various countries have gradually developed.

The largest stock exchange in the United States: New York Stock ExchangeDomestic 2 Stock Exchanges: Shanghai Stock Exchange and Shenzhen Stock Exchange

Understanding the Stock Market: The Role of Stock Exchanges, Companies, and Individuals

To comprehend the stock market, it is essential to first understand the relationship between stock exchanges, companies, and individuals.

1. The Role of Stock Exchanges for Companies

[Please note that the original text was cut off, and the translation ends where the original text did. If you provide the rest of the text, I can continue the translation.]First, we need to understand that when a company goes public, it simply registers with the stock exchange. But why would a company want to go public?

The primary purpose for most companies to go public is to raise capital, although some may simply aim to make a quick profit.

Once a company is listed, it can issue shares of its own stock on the stock exchange, and individual investors can then purchase these shares, allowing the listed company to raise funds.

For example:For example, I still operate my steamed bun shop, but I need more capital to expand the business, so I took my steamed bun shop to the stock exchange for an initial public offering (IPO).

I issued a portion of the shares of my steamed bun shop, while retaining another portion for myself.

Stocks are usually divided into several parts, with each part having a set issue price, such as one yuan per share, which is also the stock price of my steamed bun shop.

(Note: The term "包子铺" is a colloquial term for a steamed bun shop, which is a type of bakery in Chinese cuisine that specializes in making and selling steamed buns.)You can purchase 100 pieces, that is, 100 shares (stocks are bought in multiples of 100 shares), which means you hold 100 shares of the steamed bun shop's stock, and I have raised this 100 yuan.

The original purpose of the existence of the stock exchange is to help high-quality enterprises like the steamed bun shop to raise funds, allowing idle funds in society to have a better place to go and better allocate social resources.

2. The role of the stock exchange for individuals

For individual investors, the stock exchange is the place where we buy and sell corporate stocks.

For example, the 100 shares of the steamed bun shop's stock you bought make you a shareholder of the steamed bun shop. The steamed bun shop has raised money, expanded its business, and earned more money.Dividend Value

Thus, the steamed bun shop will provide you with dividends corresponding to the shares of stock you hold.

Additionally, the stock itself will appreciate in value. If the business is well-managed and the market value increases, the stock price will naturally rise as well. For example, if it reaches 2 yuan per share, then your 100 shares will increase in value from 100 yuan to 200 yuan.Transaction Value

At this point, you have the option to sell the stock and earn the difference, gaining a profit of 100 yuan, or you can continue to hold the stock long-term, optimistic that the stock will continue to rise.

So far, we have gained an understanding of the basic structure of the stock market.

In essence, the stock market is a bridge connecting enterprises and investors. Enterprises can raise more funds for better business development, and investors can enjoy the dividends brought by the company's profits.

It seems harmonious, but it's not that simple. We all know that investing in stocks is essentially investing in a company, but many stock investors do not have this awareness.We often hear many people talk about stock trading; what specific methods do they rely on to make money?

The concept is quite simple: it involves making a profit from the constant fluctuations in stock prices by buying low and selling high in the short term.

We also frequently hear that the stock market is risky, and many people lose money in stock trading.

To understand this, we need to have a clear understanding of the rise and fall of stock prices.

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