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How does the stock market work? – Oliver Elfenbaum

How does the stock market work? – Oliver Elfenbaum


In the 1600s the Dutch East India Company
employed hundreds of ships to trade gold, porcelain, spices,
and silks around the globe. But running this massive
operation wasn’t cheap. In order to fund their expensive voyages, the company turned to private citizens– individuals who could invest money
to support the trip in exchange for a share
of the ship’s profits. This practice allowed the company
to afford even grander voyages, increasing profits for both
themselves and their savvy investors. Selling these shares in coffee houses
and shipping ports across the continent, the Dutch East India Company unknowingly
invented the world’s first stock market. Since then, companies have been
collecting funds from willing investors to support all kinds of businesses. And today, the stock market has schools, careers,
and even whole television channels dedicated to understanding it. But the modern stock market is
significantly more complicated than its original incarnation. So how do companies and investors
use the market today? Let’s imagine a new coffee company
that decides to launch on the market. First, the company will advertise itself
to big investors. If they think the company is a good idea, they get the first crack at investing, and then sponsor the company’s initial
public offering, or IPO. This launches the company onto the
official public market, where any company or individual who
believes the business could be profitable might buy a stock. Buying stocks makes those investors
partial owners in the business. Their investment helps
the company to grow, and as it becomes more successful, more buyers may see potential
and start buying stocks. As demand for those stocks increases, so does their price, increasing
the cost for prospective buyers, and raising the value of the company’s
stocks people already own. For the company, this increased interest helps
fund new initiatives, and also boosts its overall market value by showing how many people
are willing to invest in their idea. However, if for some reason a company
starts to seem less profitable the reverse can also happen. If investors think their stock
value is going to decline, they’ll sell their stocks with the hopes
of making a profit before the company loses more value. As stocks are sold and demand
for the stock goes down, the stock price falls, and with it, the company’s market value. This can leave investors with big losses– unless the company starts to look
profitable again. This see-saw of supply and demand
is influenced by many factors. Companies are under the unavoidable
influence of market forces– such as the fluctuating
price of materials, changes in production technology, and the shifting costs of labor. Investors may be worried about
changes in leadership, bad publicity, or larger factors like
new laws and trade policies. And of course, plenty of investors are simply ready
to sell valuable stocks and pursue personal interests. All these variables cause day-to-day noise
in the market, which can make companies appear more
or less successful. And in the stock market, appearing to lose value often leads
to losing investors, and in turn, losing actual value. Human confidence in the market has the
power to trigger everything from economic booms
to financial crises. And this difficult-to-track
variable is why most professionals promote
reliable long term investing over trying to make quick cash. However, experts are constantly
building tools in efforts to increase their
chances of success in this highly unpredictable system. But the stock market is not just
for the rich and powerful. With the dawn of the Internet, everyday investors can buy stocks in many of the exact same ways
a large investor would. And as more people educate themselves
about this complex system they too can trade stocks, support the businesses they believe in, and pursue their financial goals. The first step is getting invested.

Comments (100)

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  2. Some of you are comparing passively getting information (learning in the school) vs. actively looking for the answers (looking in the internet for particular things you want the answer to – or just watching the video because you thought it might interest you). Go to the library, take random book and you'll find there some info you haven't been taught in the school. What does it prove? Well, nothing. Did you ask your teacher to explain it to you? Also two interesting notes: 1) you blame the school, but not the parents, who are also supposed to learn you; 2) you kindly forget to mention things that you've learned in the school, but you can't find them on TED.

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  5. They also traded slaves. Probably made a lot of money too

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  7. I have 1000 dollars but I want 100,000

  8. 3:29 CRYSIS, Said it wrong. Lol, but still great video.

  9. Thankyou now i know

  10. hey teded can you make a video about how nuclear powerplants works

  11. One thing come to mind. If share owners 'sell' their shares to someone when they feel the company is going down, that means somone is still buying these shares from them. Shouldn't the overall shares be the same then?
    Or does 'sell' here mean that they just ask the company to give their money back?

  12. Makes me eager to buy stocks

  13. very helpful thanks

  14. Video is good but basic

  15. 3:42 Java code! ok….

  16. I am still newbie in stocks but learn a lot in this no more than 5-minutes video. Thanks definitely! 🙂

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  18. im new here but I wanna ask who do you sell your stock to?

  19. It's simple. sToNkS

  20. Here it was I thought it was turtles. Turtles all the way down. Now I know how stocks work. 😒

  21. Not Much Truth in this Video, Stock Markets are a scam that should be shut down.

  22. It works like this:
    1)Invest money
    2)Your money is gone

    The end

  23. I cant say i know much about stock market but it's been my source of income for a very long time now.

  24. is it illegal to tell people where to buy stocks publicly because in every video, it always "you can do it" but never say how

  25. You feel lonely and depressed come to Ted ed

  26. Super Duper explanation

  27. such great animations!!!
    thankyou

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  34. We need more videos on stocks

  35. 3:39
    error: expected primary-expression before '}' token

  36. VoC is a company which has a country's rights

  37. This was by far the most condensed, in depth, and educational video I've found on stock investing.

  38. 85% of shares in US stock market is owned by 10% of people.

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  40. guys please dont blow all your money trying to trade with no experience because you dont know the regulation..these strategies dont build foundations..dont count on fluke

  41. Interesting info and with all the investors out there muddying the waters with jargon and speculation, it's good to bring it back to basics. Also, would you please make a video about how market forces affect or don't affect silver, gold, oil and diamond-related stocks? Sources suggest those are affected more by price fixing, gouging and insider trading rather than or more than natural market forces.

  42. Your describe the overview well.

  43. Complex system, you mean scam

  44. Its basically made up

  45. When you've been saving money but don't know what to do with it then YouTube recommend a Ted Ed about stock market and investing.

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  46. The proper title for this video should be "stock market crash course for dummies"

  47. After the views

    Ted Ed: stonks

  48. https://youtu.be/F1P4iBiU_ng
    only 4 min video please watch

  49. It took me 10years to finally understand it!!!

    Thank you so much.

  50. things I learn in shool I can beter watch twice on yt and I know it even better than in school

  51. me in a nutshell 3:03

  52. This is ALL that I need! Very brief and concise, I learned a lot.

  53. Just one question though at 2:21 What will happen after they sell their stocks to someone? Will it turn back into a real money OR you're just exchanging your company share to someone? If, yes then is that person/company who bought the shared-stocks willing to risk his investment to a falling company-market?

  54. I love that quote at the beginning.

  55. This video is great and so informative 🙂

  56. Ted very insightful and very knowledgeable how do I get a hold of you I want you on the air I have a radio show coming up

  57. Would like to have some hints on the history of the market and also some hints on the guiding principles as well !

  58. didn't mention trading volume

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  63. Is stock trading easy

  64. watches wolf of Wall Street once

  65. Me at 12 am: I’ll go to sleep
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  68. https://www.youtube.com/watch?v=_1i3RMb3_7w

  69. First rule of trading is to secure your money then second is to make more money, so if you are not making money trading Stocks then its best you quit to save your money. Or best still get an expert to help you out.

  70. What’s the best advice to give to someone that’s new to stock trading?

  71. The fact i must know how to divide polynomials or the Pythagorean theorem to graduate but not how the Stock market works is absurd.

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  73. If you’re thinking of investing in the stock market and the fear of loss makes you upset, then you should not invest.

  74. Omg thank you I understand now

  75. I am doing a project about the stock market. Is there a metaphor or a simile in the video?

  76. https://www.digistore24.com/redir/94047/ETALEUS/

  77. This is confusing. Just because you own some stock, doesn’t mean that you get a portion of the money. If it were like this, then yes, demand for the stock will increase. But, why would demand increase when no actual money is made unless by reselling it. And since no demand is present, reselling would be unprofitable!

  78. People should know you can’t stop learning in this business, I have seen innovative mindset like Jim oddain and I am patience enough with my options. Now I get to win more in return.

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