Investing for Dummies, 4th UK Edition

Chapter 6

Comprehending How Stock Markets Work

In This Chapter

Unravelling the mysteries of shares and your ownership rights

Explaining bonds and the rights you don’t get

Looking at the basics behind price rises and falls

Discovering whether you can predict price moves

Going behind the scenes to see how the stock market operates

All financial strategies, including those to keep all your money in cash or property, are based on what happens on stock markets – they’re the big drivers of the world’s finances. Many stock markets exist across the world, although the most important are in New York, Tokyo and London. What unites them all is that they’re where shares and bonds are traded and, hence, the prices are determined. That sounds simple but stock markets can appear to be places of great mystery – even more so nowadays because most don’t really have a physical presence at all. This chapter unravels the mysteries of the stock market. I explain what shares and bonds are. I spell out ...