What is the structure of stocks? Why does the stock price fluctuate? How to make a profit?

When a stock beginner invests in stocks, let’s first understand how stocks work . If you can make an investment after understanding the mechanism to some extent, you will feel more secure. I want to work on stock investment with a calm mind so that I can make appropriate decisions.

  • [Stock structure ①] What is the structure of a joint-stock company in the first place?

First of all, what kind of mechanism does a joint-stock company consist of? Companies first need money to buy raw materials and pay their employees. The funds required for upfront investment until the sales figures come out are procured through bank borrowing and stock issuance.

The reason why a company issues shares is that unlike borrowing, it does not have to be repaid . In this case, there is no need to set collateral even if you want to raise additional funds. Therefore, the biggest merit of issuing shares is that it is easier to raise funds than bank borrowing . If the stock price rises, it will be possible to raise more funds even if the number of shares issued is small, and it will be easier to raise funds by issuing shares.

Just because a corporation is a corporation, it does not mean that you can buy stocks of all companies. Even a joint-stock company cannot buy stocks of companies that are not listed on the stock market. For example, there are unlisted companies even in famous companies such as Suntory and Takenaka Corporation. You cannot invest in unlisted companies, so make sure you are listed when choosing an investee company .

[Millionaire’s Investment Philosophy “The Law of Victory” heard by JACK]
・What is the idea that “people with little investment funds” should have, as revealed by Millionaire Yuunagi?
・Is contrarian investment a rich strategy? Proactive investment to get rich (Mr. Yunagi)

  • [Stock structure (2)] What is the stock trading system?

Next, what is the mechanism of stock trading?

First of all, the time zone when you can buy and sell is limited. At the Tokyo Stock Exchange, etc., trading is possible from 9:00 to 11:30 and from 12:30 to 15:00 . Orders can be placed at other times, but trading can only be done during trading hours. In addition, trading is possible only on weekdays, and trading is not possible on Saturdays, Sundays, and public holidays .

In addition, in order for the sale to be successful, the seller and the buyer must have the same amount and quantity. However, since there are many buy and sell orders in the market, we have a mechanism to determine the order of closing transactions based on the following three principles.

First, the “principle of price priority”. It is a principle that transactions are completed in order from the buy order with the highest price and the sell order with the lowest price . Next is the “principle of time priority”. When multiple buy orders and sell orders are placed at the same price, the transactions with the earliest orders are completed in order .

There is also a “market priority principle”. For orders with the same price and time, the market order placed without specifying the price is completed first, and then the limit order with the specified selling price is completed .

These three principles are the “auction method” principles used when trading in most stocks . By the way, in the emerging stock market JASDAQ, some stocks are traded not by the auction method but by the “market making method” in which the securities company, which is the market maker, always presents the selling and buying prices and trades with investors. Was.

  • [Stock mechanism ③] What is the mechanism for determining stock prices?

So how is the stock price determined in the stock market? Let’s take a concrete example to see if the stock price fluctuates depending on the supply and demand of stocks .

Suppose that 100 shares of a company’s stock are sold for 501 yen and 500 yen, respectively. If a buy order for 100 shares is placed for 500 yen, the stock price will be 500 yen. After that, if an order for 100 shares is placed for 501 yen, the stock price will rise to 501 yen. The stock price in the market represents the price at the time of the last closing of the sale.

In this way, stock prices fluctuate depending on supply and demand. Factors that influence supply and demand include corporate performance, interest rate fluctuations, and exchange rate changes . For example, if a company that was expected to be in the red this term turns around and announces a profit forecast, the market will like the announcement and buy orders will increase for the stock, and the stock price can be expected to rise.

In addition, when interest rates fall, bond investment becomes less attractive, and it becomes easier to buy stocks with borrowed funds, which puts upward pressure on stock prices. Furthermore, if the yen strengthens, exports will be disadvantageous / imports will be advantageous in Japan, and the stock prices of manufacturers with a high export ratio will fall, while the stock prices of wholesalers with a high import ratio will rise. In Japan, stock prices tend to rise when the yen depreciates due to the fact that the export industry is more developed than the import industry.

In this way, the stock price is determined by various factors, but it will be understood by looking at the intertwined factors one by one. When investing in stocks, I want to be aware of the factors that cause stock price fluctuations so that I do not have to worry about them.

  • [Stock structure ④] What is the mechanism for making profits from stocks?

Let’s also look at how stock investment makes a profit. As a way out of the profits, “income gain” and “capital gains” are exemplified. Capital gains are gains on the rise in stock prices . If the company can be expected to grow more than when it was purchased, or if the business performance improves, the stock price tends to rise.

Income gain, on the other hand , is the profit from dividends on stocks . When a corporation makes a profit, it may return a part of the profit to investors instead of reinvesting it. For start-ups that have to spend a lot of money investing to grow, the proportion of their profits that can be used for dividends tends to be small. Therefore, if you want to get a stable dividend, you should choose a company with relatively stable performance.

Besides that, way to enjoy a shareholder special benefit in some cases. Depending on the company, they will give you their products and services as a special treatment. If you don’t want the product, try to get a gift card such as a quo card. Unlike dividends, special treatment is not taxable, which is also attractive.

  • [Stock structure ⑤] Let’s actually trade

Once you understand the basic mechanism of stock investment, let’s actually trade. By managing it, you will be able to acquire your own knowledge and improve your level as an investor . If I can improve my level, I would like to acquire the necessary knowledge at that stage so that I can proceed with more efficient investment. (ZUU online editorial department)


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