Stock Exchange from A to Z
How to earn money
What is the origin of the Stock Exchange?
The Stock Exchange began in the 14th Century in the city of Bruges,
A group of traders would gather to do business in the house of a family named
Burse, which had a coat of arms and three purses on the door. In Bruges the houses had no
numbers, they had drawings. Each house was known for the drawing it displayed.
That´s why this house was known as the house of the purses[mf1] .
What is the Stock Exchange?
It is a nonprofit corporation that provides facilities for stock brokers to trade shares of stocks and other securities.
What is the purpose of the Stock Exchange?
It centralizes the operations of the purchase and sale of shares, expedites the exchange of information on prices, etc.
What is a share?
A share is a certificate representing the smallest portion in the capital of a company. The most important shares are ordinary shares and preference shares.
What is an ordinary share?
When stock exchange quotes are published in newspapers, some of them include the ON designation after the company name (Petrobrás ON, Vale do Rio Doce ON, etc), meaning ordinary nominative. These are ordinary shares. A person who buys these shares (the shareholder) acquires the right to vote on some resolutions concerning the company. Some of these shares also entitle the owner to a portion of the company´s income. They are less frequently traded than preference shares.
What is a preference share?
Preference shares are those represented by the PN designation, meaning preference nominative - (Petrobrás PN; Vale do Rio Doce PN, etc). These are the most traded ones. These shares do not carry the right to vote on resolutions of the company. On the other hand, they entitle the owner to a greater portion of the profits of the company (dividends).
What is a dividend?
It is a portion of the profits of a company that is paid in cash to the shareholders. The more shares of a company you have, the more dividends you will receive if the company makes a profit.
What is the Bovespa Index (Ibovespa)?
Hundreds of shares are traded in the São Paulo Stock Exchange. The most traded among them constitute a sort of barometer for the share market. The Bovespa Index is currently measured on the basis of the activity of the shares of 47 companies. The index represents the average profits or losses of these companies.
There are other indices such as IBX, Isenn (the Rio de Janeiro Stock Exchange Index) and FGV-100.
How can you buy shares?
Through a stockbroker or an investment fund.
What is a stockbroker?
It´s a private or state financial institution, either independent or linked to a bank, which acts as an agent in the buying and selling of shares and may participate in trading sessions.
What is a trading session?
It is a session during which business is conducted in the Stock Exchange.
What is the meaning of closing high/low?
It means the Stock Exchange closing index was either higher or lower than the closing index of the previous day´s trading session (except Saturdays and Sundays, when the Stock Exchange is closed).
How can you know the right time to buy or sell shares?
Buying them low (when the prices are low) and selling them high (when a share appreciates) is the best possible transaction. But it is difficult to know when the prices are the highest or the lowest. That´s why there are market professionals and fund managers. But it is true that there are times in which no one has a clue as to what´s going on.
Can children buy shares?
Yes. Some stockbrokers accept investments from children, even if children can only invest what´s left of their allowance. But their parents should authorize and assume the responsibility for the investment of their children.
Illustration: The Stock Exchanges have emerged in the century. XIV, in the city of Bruges, Belgium