The stock of a company is the name given to the amount of capital initially invested in the company by its founders. This stock amount can then be divided up proportionally into shares and these shares can be sold and traded. Owning shares in a company’s stock means that you own a part of that company.
Shares are bought and sold on the stock market, and the performance of groups of these shares is measured through stock market indices. A stock market index is a method of measuring the value of a particular group of stocks. You may well have heard of some stock market indices, such as the FTSE 100, or the Dow Jones. The FTSE 100, for example, is a measure of the performance of the stocks of the top 100 companies trading on the London Stock Exchange, while the Dow Jones is the American equivalent, only it takes into account just 30 blue-chip companies listed on the New York Stock Exchange.
These stock market indices are important to investors as they provide an indicator as to how the business sectors in particular countries are performing, and so provide a standard against which to measure the performance of their own investments. If your investments are constantly flagging behind the FTSE 100 Index for example, then you may want to consider making some investment changes.
Just as you can spread bet on the price of individual shares, you can spread bet on stock markets too. Rather than betting on the value of a particular company’s shares, you bet on the performance of a particular stock market index. So if you’ve placed a ‘buy’ trade on the FTSE 100 and it rises 5 point in a day, you make a profit, if the FTSE 100 slumps a few points, then you make a loss. When you spread bet on stocks, you don’t actually buy or invest in any stocks at all, you are simply betting on the performance of that particular stock market index.
You can bet on a variety of stock market indices from around the world, from the US to the UK, Europe to Asia. Each stock market’s spread will differ according to its popularity, so less popular markets will tend to have larger spreads. You can read more detailed information and tips about spread trading stocks in our Spread Betting Markets section (http://www.tradefair.com/spread-betting-guide/spread-betting-markets/).