A lot of us have been thinking to start investing in stock markets. However, our little knowledge about it limits us to take a risk and to understand what is happening in today’s market. Due to its hifalutin language as well as frightening numbers and graphs, it scares us off and loses our chance to know about it.
Don’t worry, you are not alone.
A lot of people, especially business elites, have known this for several years. They have a wide grasp of knowledge in every move of the market. However, a pandemic has struck us and now not only people are weakening but also the world market. The forecast of the market has been disrupted due to the unforeseen pandemic.
With this, we need to unwrap the mystery of stocks and know its basics by learning some of its jargon. This is to further understand what it says in our current situation.
What is a stock and stock market?
A stock or a share, also known as the company’s equity, is a unit that represents ownership to a corporation. It represents the measurement of the proportionate claim on an asset and profit of the company. Each corporation, especially the giants, has a proportion of shares depending on the percentage owned.
If you are wondering why corporations do this, the stock is another type of investment from the buyer which the company uses your investment to add to its capital. Therefore, you a part-owner of a corporation that gives you specific rights to the company as a contribution to them. Also, since you have given additional capital to them, this means that the company can produce more products to its consumers. Therefore, there is a probability that more consumers avail of your product as well as the other way around.
There are two types of stocks, common and preferred. Their distinction is that common shares usually have voting rights in the corporation. It enables the shareholder to raise options as well as decide, democratically, what would benefit the corporation. In an event of decision making, the gravity of the vote of a common shareholder depends on how many shares owned.
The preferred share doesn’t have any voting rights. They just have a preference for whether what company to invest in. But both of them have the right to receive dividends as well as assets when liquidation took place.
When it comes to the stock market, it refers to stock market indexes where big corporations are listed on the market board and show whether a company illustrates good or bad performance in the market. It also functions as an auction house to enable sellers and buyers to negotiate and make market trades.
Buyers, or investors, purchase shares that allow companies to grow their company making you a part-owner of that company.
In every investment, the company expands its resources to further deliver more products to its consumers.
How does COVID-19 influence the flow of the stock market?
Thousands of people have been reported to be infected by COVID-19 due to its high contamination rate each day around the world. Death rates are also rising because vaccines are not yet available. The Government bodies from around the world have been issuing lockdown to prevent further cases of the virus.
From an article published by BBC, the pandemic deteriorates the overall stock markets around the world. It already affects the oil exporters and distributors since the virus cuts the demand in gas and oil. Since companies advised their employees to work from their homes, the demand for transportation deteriorated as on consuming gas and oil.
For a shareholder, the value of their investment has been depleting because there is no trading in action. By continuing the lockdown by the other countries, the operation of corporations around the world stops. The depletion of the demand causes the depletion of profits for most countries because of the pandemic.
Also, stocks in stock markets are losing their value and this might cause bankruptcy among companies. To gain profit, companies need to continue their operations even though they do not meet their expected profit. Therefore, they are also obliged to sustain their employees by giving them their salaries since force majeure took place. With this, capital and other assets are at risk for some companies to sustain their workers instead of allocating it to some other investments.
Asset flows and currency rates are also affected by the virus. From an article published by the World Economic Forum, the outbreak of the coronavirus will likely cost $1 trillion according to the UN’s trade and development agency. Also, the least developed countries will face a great threat if the virus continues to spread.
The stock markets are struggling since the effect of this pandemic. It became a domino-effect for all people who also need to survive and earn every day. The government should work on a more sustainable plan for its people to lessen the impact of the virus.