Video: How the Stock Market Works

How the Stock Market Works

Here is a video of a cute cartoon (about 9 minutes long) that explains the basic concept and flow from a beginning business to one that is large enough to issue stock as a publicly held company.



This video uses an example of an oil drum producing company that started as a small but really good company.

They made a lot of happy customers. In fact, the customers were so happy, many of them wanted more oil drums. Unfortunately, customers wanted more oil drums than this little company could possibly produce.

They needed to expand, but they didn't have the money to do this expansion themselves.

So they formed a corporation to sell shares to raise money to expand their operations.

This video goes through the basic steps that these owners must do to get approved by a public stock exchange, and things they need to do to get accepted into that trading system.

It explains about needing to make public quarterly reports. It also states that you need to have a board of directors. In the video's example, the board of directors discuss how much of the business' profit needs to be distributed to the shareholders in the form of dividends.

It has a cute exchange with a cowboy selecting a Round Lot (a full 100 shares) versus an Odd Lot (fewer than 100 shares in a transaction).

It shows the stock purchase and selling sequence and the stock brokers' role within it.

Finally, it shows how invested money plays a major role in all of our lives.

It makes a (really) quick disclaimer that not all investments turn well. They quickly note that there is some risk.

You will not know enough to be a broker, but this is a cute overview of how the stock market works.