Stocks
and the Stock Market
The stock exchange is
a marketplace where brokers buy and sell stocks and bonds for other people. Many countries have
one or more stock exchanges. Smaller stock exchanges often handle only national
stock, whereas the big stock exchanges handle the stock of big international corporations.
Corporation
A corporation is
a company that has the right to issue
stocks. They are registered with the government and
have laws that protect them and their shareholders . Every corporation has
a board of directors who make decisions for
the company.
People who invest in a corporation usually
have limited liability. If a corporation goes bankrupt investors
only lose the money that they have invested.
Stocks and Bonds
A person who
buys stock becomes one of
the company’s owners. They
buy a share of a company. A bond is an agreement to lend money to a company for a certain period of time.
Companies sell stocks and bonds to people
because they need money and want to expand. Sometimes they
want to build more factories or develop more products.
If a company
makes profits it can use the
earned money in a few ways. It may decide to invest more into the company and expand. Most
of the time the shareholders of the company get a dividend,
which is a part of the yearly profit. This dividend is not always the same and can change from year to year.
Most corporations offer two kinds of stock. Owners of common stock can go to the annual meetings of stockholders, present their own ideas
there, ask questions about the company and have a right to vote for the board of directors.
Owners of preferred stock usually do not have voting rights or the right to attend stockholders’ meetings. However,
they get dividends.
A person who
buys a bond is not buying ownership in a company but lending the company money. It promises to give back the money to the bondholder after a certain time, such as ten or twenty years. In
return for the money, the companies pay interest. Not
only companies but also governments can issue bonds if they need money.
People buy stocks and bonds because they hope that a corporation will earn money as it grows. As time goes on shareholders usually earn more money by owning stock than by saving
their money in a bank or investing in other
things.
Buying stock is also a risky business. If
you buy a share of a certain
company and it does well over the years
the value of your shares will go up. You could sell them at a much higher price than when
you bought them. Sometimes, however, things happen that make the value of certain stocks go down. If a company does
badly or goes bankrupt the value of your shares goes down too and you
actually lose money.
There are many
reasons why the price of a company’s stock rise or fall. For example if people are afraid that
prices will go down, they may start selling their shares. If
many people sell a large number of stocks, they can actually make prices go down. If this continues for a longer time it may lead to a crash. Prices of stocks fall so low that people don’t want to buy them any
more because they
are afraid they won’t get their money back.
Stock exchange
To buy stock
most people go to a broker, a person who is member of a company that is allowed to
buy and trade bonds and stock.
Let’s say
someone in California wants to buy 2000 shares of a company. He doesn’t have to travel
to the New York Stock Exchange. He calls a stockbroker, usually a member of a brokerage house,
who gives him information on the company and tells him the price of thestock.
When the investor tells him to buy, the broker sends the order to his firm’s trading desk at the stock exchange which then places the order. The order is sent
to stock tickers throughout the country that constantly
display the value of stocks. Because buying and
selling stocks is concentrated in one place you know the price of each stock at once.
Stocks are
often traded under a contract called an option. It allows a person to buy or sell stock at a certain price within a certaintime.
If the value rises within that time and within the price set the stock is
quickly sold again. The prices change throughout the day depending on how good or bad trading is. Small orders are usually executed automatically by computers.
Large orders however are traded directly at the stock exchange.
Each year
investors trade billions of shares worth hundreds of billions of dollars. But not all companies are listed on the stock
market. You must be pretty big and have a lot of power. You must also show the
stock exchange that you are in a good financial position and that you company
is doing well. The world’s biggest stock exchange in New York has about 3oooo
companies listed.
To see how
well or badly stocks are doing most stock exchanges have an index. This
is a number that shows the average
share prices of the major companies. The
most important indices are the Dow
Jones (New York), FTSE (London), DAX
(Frankfurt), Nikkei (Tokyo), Hang Seng (Hongkong)
Bulls and Bears
Bears are cautious animals that don’t like to move fast.
Bulls are animals that like to charge ahead. At the stock exchange bears are
investors who believe that the price of stock will go down. A bull believes that the
prices will go up. Likewise, a bear market is a period in which stocks usually fall in value, a bull market a time when they rise.
History of the stock exchange
The first European
stock exchange was founded in Antwerp, Belgium in 1531. The first stock exchange
in England was formed by a group of brokers in London in 1773. Until that time people usually
went to coffee houses to buy and sell stocks because they found the brokers there.
In New York
City brokers met under an old
tree on Wall Street. They organized the New York stock exchange in 1792.
For many years
only rich people bought and sold stock. It was not until World War I that more and more
private investors started investing their money in stocks. There was a huge rise in value and investors made a lot of money
Stock market crash of 1929
The worst crash happened in the
United States in October 1929. Over many days investors sold so many stocks that the whole
marketcollapsed. This affected the economy not only in America but in Europe as well. Farmers could not sell their crops, factories couldn’t
sell their products, banks had to close and workers earned very little money. This lasted for almost ten years and became later known
as the Great Depression.
Penjelasan:
1.
A corporation is
a company that has the right to issue
stocks.
(Present
perfect(Non Verb))
2.
Every corporation has
a board of directors who make decisions for
the company.
(Present Perfect
Tense)
(Simple Present
Tense)
4.
People buy stocks and bonds because they hope that a corporation will earn money as it grows.
(simple Future
Tenses)
5.
buying and selling stocks
is concentrated in one place you know the price of each stock at once.
(simple present
tense)
6.
As time goes on shareholders usually earn more money by owning stock than by saving
their money in a bank or investing in other things.
(Simple Present
Tense)
7.
it does well over
the years the value of your shares will go up.
(Simple Present
Tense)
8.
If a company does
badly or goes bankrupt the value of your shares goes down too and you
actually lose money.
(Simple Present
Tense)
9.
Prices of stocks fall so low that people don’t
want to buy them any more because they are afraid they won’t get their money back.
(Simple Present
Tense(negative form))
(Simple Present
Tense(Negative Form))
11.
The order is sent
to stock tickers throughout the country that constantly
display the value of stocks.
(simple present
tense)
12.
Small orders are usually executed automatically by computers.
(simple present
tense)
13.
The first European stock
exchange was founded in Antwerp, Belgium in 1531.
(simple past
tense)
14.
The first stock exchange
in England was formed by a group of brokers in London in 1773.
(simple past
tense(non verb))
15.
Until that time people usually
went to coffee houses to buy and sell stocks because they found the brokers there.
(simple Present
Tense)
16.
It was not until World War I that more and more
private investors started investing their money in stocks.
(Simple Past Tense(non
vern negative))
17.
There was a huge rise in value and investors made a lot of money.
(Simple Past
Tense)
18.
Farmers could not
sell their crops, factories couldn’t
sell their products
(Simple Past Tense (Negative Form))
19.
banks had to close
and workers earned very little money
(Past Perfect
Tense)
20.
Owners of preferred stock usually do not have voting rights or the right to attend stockholders’ meetings
(Simple Present Tense)
