Stock market guide UK - investment and trading

The world of stocks and shares is a confusing place, and few people fully understand how the UK stock market works. Even those that already own shares often know little about investing and trading. Whilst it is wise to employ a stockbroker to assist you with your share dealing, you may find it beneficial to get to grips with at least the very basics.

What is the stock market?

Essentially, this is the process through which all shares are traded. The actual place where the shares are bought and sold is called an exchange, and together these exchanges regulate the market. Historically, a stock exchange was a place where brokers would literally exchange shares with one another; however now a large proportion of share dealing is carried out electronically.

Almost all countries with a developed economy have their own stock market, and these are often driven by more than one exchange. In the United States, for example, the two principal exchanges are the New York Stock Exchange and NASDAQ (National Association of Securities Dealers Automated Quoted System). NASDAQ mainly lists technology companies, and is entirely run on a computerized system.

What system is there in the UK?

The main exchange in this country is the London Stock Exchange. However, for companies that are either too small or not established enough for this exchange, the London Stock Exchange also regulates the Alternative Investment Market.

How does the whole system operate?

To all intents and purposes, the stock market is all about bringing buyers and sellers of shares together. It is like any market, where price is dictated by supply and demand. The more demand there is for certain shares, the higher the price will be. And when the share price suits both the buyer and the seller, an exchange can take place, provided that certain rules and regulations are adhered to.

How can I compare different companies to decide which shares to buy?

If you want to buy shares in a particular industry, you will be able to compare all the shares that fall into that same sector. There are a number of different categories in the UK, ranging from the insurance sector to the media and photography sector.

© The Pink Fridge Online Magazine 2008 - Stock Market