| When you hear on the news that the Dow was up | | | | held company's. I am just giving you the basics so |
| 20 points, S&P 500 up 2, and the Nasdaq up 1, | | | | you have an understanding on how the stock market |
| what does this mean? Well lets look at the Dow first. | | | | works. |
| The Dow Jones Industrial Average has 30 company's | | | | Ok so you figured out it is going to cost you 10 |
| in the group. So when you hear that it was up 20 | | | | million dollars to get everything you need to start |
| points on the day, what that tells you is that the | | | | making this hot new product. How are you going to |
| average value of those 30 company's was up. The | | | | get that kind of money? By selling shares of stock to |
| same is so with the S&P 500, this group is made | | | | people who believe in your new product, and believe |
| up of 500 company's and they take the average | | | | it is going to be a big success and make a lot of |
| value of those company's. This gives you an idea of | | | | money. So when they buy shares of stock they are |
| how the 9000 + company's in the stock market are | | | | investing their money on hopes of making more |
| doing. If the DOW was down 100 points you would | | | | money. |
| know that most of the stock prices of those 30 | | | | So you sell one million shares of stock at $10.00 a |
| company's did not go up in value | | | | share and that will give you the 10 million dollars you |
| Now lets look at an individual company. What is a | | | | need to start making your product. That is where |
| share of stock, how do they arrive at the amount of | | | | the number of shares and the price per share comes |
| shares, and where does the price per share come | | | | from. As your company grows and starts to make |
| from? | | | | money more people will want to invest in your |
| Lets say you invented a hot new product that will | | | | company and the price per share of stock will rise. |
| help make peoples lives a lot easier. In order to make | | | | It is about supply and demand. When more people |
| this product you are going to need the equipment to | | | | want to buy shares of stock in your company |
| make it, the supply's to make it, the people to make | | | | (demand), but the people holding on to the existing |
| it, and a building to make it in. All of this is going to | | | | shares (supply) do not want to sell them at the |
| cost a lot of money, money you probably don't have. | | | | current price there will be offers to buy the stock at |
| Just to keep this simple i will not get into the legal | | | | a higher price. |
| aspect, such as talk about corporations and privately | | | | |