What is a Stock Exchange?
Advantages and Disadvantages of an Exchange
The Stock Market & Concepts of Trading
Advantages of Trading on a Stock Exchange:
- The cost of trading compared to other investment vehicles is relatively low.
- The value of a stock/share can be known at any time by accessing the share price through a stock broker or trading platform.
- With the use of online trading platforms, trading on a stock exchange is simple and easily accessible.
- Due to high volumes of traders, one has a greater opportunity to sell shares to waiting buyers.
- With knowledge on trading, trading can offer a higher return of investment than any other type of investment.
- Profitable companies pay regular dividends to shareholders.
- Stock Exchanges maintain strict rules and regulations, reducing risk of fraud.
- Trading requires a smaller capital outlay than an investment like property, making it more accessible to all.
- A shareholder owns shares in the traded company, with certain rights, but is not held liable or accountable for any losses incurred by the company.
- Risk can be minimised with trading discipline and a trading strategy.
- Access to trading funds is a simple process with little delay.
- While it is always possible to sell a share, you are not guaranteed of the share trading at the price you want to sell it at, as share prices rise and fall.
- Trading successfully requires knowledge and dedication.
- Share prices fluctuate and may result in a profit or loss for the trader.