Free Essay Example on Economic Stock Market

In the Economic stock market, stocks or shares are exchanged between a stock buyer and a stock seller. A stock is a share, equity, or a type of security in the part of the assets of a company or corporation. It represents a claim on the earnings of a company and the more stocks one has the more the stakes in the company. The stocks are sold in an exchange market where other financial instruments like securities, derivatives, commodities are also sold. The most common exchange markets are the NASDAQ which stands for National Association of Securities Dealers Automated Quotations and the NYSE meaning the New York Stock Exchange. These two dealers are public traded organizations highly in demand on the stock exchange market. They both also offer high-end services in the exchange of equities. However, the difference is in the way they work. NASDAQ a high-tech market deals with technology, electronics, and the internet- based companies while the NYSE deals with more established and older markets mostly blue chip organizations and vast industries. NASDAQ trades on the basis of telecommunication network while the NYSE does the physical trading where people trade on behalf of their companies. Also, NASDAQ is the most cost effective in listing stocks compared to NYSE (Johnson et al 3-4). Lastly, the NASDAQs stocks are considered to have a high volatility in terms of returns but the prices of NYSE fluctuate more constantly.

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Additionally, in order to determine the general trend of the stock market, investors use the measurements of stock market indicators (Investopedia). The main indicators in are the Dow Jones Industrial Average (DJIA) which indicates the price-weighted average of 30 stocks of 30 largest companies in the US and the Standard & Poors 500 (S&P 500) which is a market value-weighted index of 500 stocks of 500 large companies from a vast number of industries. Martins states that S&P 500 is more encompassing as it brings together the average stock of greater sample of the total in the U. S and since it is market-value weighted it ensures that in a $20 stock there is a 10% change that affects the index the same way as a $50 stock (CBS). On the other hand, the DJIA is a price-weighted meaning that the average is affected more by the portfolios large stocks. Therefore, in the field of Indicators, the S$P 500 represents better the broader U.S economy and is referred to as the best single gauge of the large-cap U.S stocks.

The economic market in the stock exchange consists of various sectors. The technology sector is one of it comprising of companies like Alphabet Inc. symbolized by GOOGLE, Microsoft Corp, Facebook Inc., and Intel Corp among others. Secondly, the financial sector includes companies like Berkshire Hathaway Inc. Berkshire Hathaway B Inc., and Well Fargo Corp, among others. Another sector is the Consumer Goods sector which includes companies like Apple Inc., Coca-cola Co and Toyota Motors Corp among others. Other sectors include the service sector with companies like Amazon. The best companies to invest in are the Apple Inc., Alphabet Inc. or Google, and the Berkshire companies since they have the highest returns, their stocks are highly volatile in that they have a more growth perspective. In conclusion, investing in this three companies will ensure I get the best returns out of my stocks capital.

Reference

"What's the Difference Between the Dow Jones Industrial Average and the S&P 500?" Investopedia. N.p., n.d. Web. 19 June 2016.

Dow Jones Industrial Average Vs. S&P 500: Which Index is better? - CBS News." CBS News - Breaking News, U.S., World, Business, Entertainment & Video. N.p., n.d. Web. 19 June 2016.

Johnson, Charles J, Joseph McLaughlin, and Eric S. Haueter. Corporate Finance and the Securities Laws. , 2014. Continually updated the resource. Read more