Category Archives: Stock Secrets

Types Of Financial Markets – Part One

A financial market is a broad term describing any marketplace where buyers and sellers participate in the trade of assets such as equities, bonds, currencies and derivatives. Financial markets are typically defined by having transparent pricing, basic regulations on trading, costs and fees, and market forces determining the prices of securities that trade.

Financial markets can be found in nearly every national in the world. Some are very small, with only a few participants, while others – like the New York Stock Exchange (NYSE) and the forex markets – trade trillions of dollars daily.

Capital Markets

A capital market is one in which individuals and institutions trade financial securities. Organizations and institutions in the public and private sectors and also often sell securities on the capital markets in order to raise funds. Thus, this type of market is compose of both the primary and secondary markets.

Any government or corporation requires capital (funds) to finance its operations and to engage in its own long-term investments. To do this, a company raises money through the sale of securities – stocks and bonds in the company’s name. These are bought and sold in the capital markets.

Money Market

The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities are traded. The money market is used by participants as a means for borrowing and lending in the short term, from several days to just under a year. Money market securities consist of negotiable certificates of deposit (CDs), banker’s acceptances, U.S. Treasury bills, commercial paper, municipal notes, Eurodollars, federal funds and repurchase agreements (repos). Money market investments are also called cash investments because of their short maturities.

Borsa Italiana

The Borsa Italiana S.p.A., based in Milan, is Italy’s main stock exchange. It was privatized in 1997 and is a part of the London Stock Exchange Group plc since 2007. In 2005, the companies listed on the Borsa were worth US$890 billion. It is also informally known as Piazza Affari (“Business Square”), after the city square of Milan where its headquarters (the Palazzo Mezzanotte building) is located.

Borsa Italiana has managing responsibility for Italy’s derivatives markets (IDEM and MIF) and its fixed income market (MOT). On the MOT (Electronic Government Bond and Securities Market), buy and sell contracts are traded on government securities and nonconvertible bonds; the EuroMOT is the Euro-Bond Electronic Market that trades Eurobonds, bonds from foreign issuers and asset-backed securities.

The exchange has pre-market sessions from 08:00 am to 09:00am, normal trading sessions from 09:00am to 05:25pm and post-market sessions from 06:00pm to 08:30pm on all days of the week except Saturdays, Sundays and holidays declared by the Exchange in advance.

JSE Limited

JSE Limited, previously known as the JSE Securities Exchange or Johannesburg Stock Exchange, represents the largest stock exchange in Africa. In December 2013, market capitalization of the JSE reached US$1,007 billion.

The discovery of gold on the Witwatersrand in 1886 led to many mining and financial companies opening and a need soon arose for a stock exchange. Today, the JSE provides a market where securities can be traded freely under a regulated procedure. It not only channels funds into the economy, but also provides investors with returns on investments in the form of dividends. The exchange successfully fulfils its main function—the raising of primary capital—by rechannelling cash resources into productive economic activity, thus building the economy while enhancing job opportunities and wealth creation.

The exchange is directed by an honorary committee of 16 people, all with full voting rights. The elected stockbroking members, who cannot number less than eight or more than eleven, may appoint an executive president and five outside members to the committee. Policy decisions are made by the committee and carried out by a full-time executive committee headed by the executive president.

The JSE is governed by its members but through their use of JSE services and facilities, these members are also customers of the Exchange. Although there is only one stock exchange in South Africa, the Stock Exchanges Control Act (repealed by the Securities Services Act of 2004) does allow for the existence and operation of more than one exchange. Each year the JSE must apply to the Minister of Finance for an operating license which vests external control of the exchange in the FSB.

JSE’s normal trading sessions are from 9:00am to 5:00pm on all weekdays except Saturdays, Sundays and holidays declared by the exchange in advance.

The Alternative Exchange is a stock exchange that was founded as a division of the JSE in order to accommodate small- and medium-sized high growth companies. Its website is accessible from the front page of the JSE’s main website. The Alternative Exchange is known as AltX.

The Biggest Stock Market Myths – Part Two

There’s a second chance

“Fallen angels will go back up, eventually” – Don’t believe a word of this! Whatever the reason for the fall is, there is simply no going back – the stock will not reach its historical peak ever again. Nothing is more destructive to amateur investors than thinking that a stock near a 52-week low is a good buy.

Stocks that go up will eventually go down

The laws of physics can’t be applied to the stock market. There’s no gravitational force to pull stocks back to even. Although it may seem logical that everything that goes up will go down at some point, don’t try to apply that logic when making investment decisions. The stock price is a reflection of the company – as long as the company is doing business well, the stock price will remain at the same level or increase in case of extra good company performance.

The Biggest Stock Market Myths – Part One

Just like in any other sphere of life, there are certain myths surrounding stock business. People tend to believe in them without reasonable proof. Here are a few common myths about the stock markets that often arise.

Investing = gambling

The most common misapprehension is that investing in stocks is just like gambling. Investing and gambling couldn’t be more different. Explained in a few words – investors think of shares as a trading vehicle, and they forget that stocks actually represent the ownership of a company. Investors are constantly trying to assess the profit that will be left for shareholders. Gambling, on the other side, is a zero sum game – it takes money from a loser and gives it to a winner. There is no value creation in this process.

Stock Market Is For Rich People

Numerous studies have shown that claims like “Stock Market is an exclusive club only for brokers and rich people” are false. The advent of the internet has made the market much more open to the public than ever before. All those data and research tools that can be found online are now available to every individual, not only to brokers (like they were in the past).