Dear Investor,

To answer your question on “What is the stock market?” which can be difficult to understand when it is intermingled with words such as securities, Wall Street, stocks, bonds, futures, and I will stop with the financial jargon.

 

The stock market is where buyers and sellers trade equities (fancy word for stock of publicly traded companies) bonds, and other types of securities. A publicly traded company chose to go public to raise money (capital) to expand the business. The capital is raised through loans (bonds) which pay the lender (you) a set rate of interest based on the company’s creditworthiness or they can sell a portion of the company (stock) to the investor (you) at market value. As the company grows or decreases in value so does your share/portion of the company.

 

The stock market allows companies to raise money to grow and create jobs that otherwise they could not have or if so it would take them many more years. With any investment, there is a potential for loss and some of these companies grow exponentially while others go out of business and it is difficult to tell the winners from the losers even for professionals. At PlanVestor we believe it is best to invest in low cost index funds that invest in a broad segment of the market. We are getting into more topics and I do not want to overwhelm you with information. Hope I answered your question.

 

Sincerely,

 

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