what exactly is the wall street or “trading company” such as Dow Jones and Nasdaq and how does it work?

Question by winbig: what exactly is the wall street or “trading company” such as Dow Jones and Nasdaq and how does it work?

Best answer:

Answer by djvcpa
A really good answer to your question could be very complicated . . . .

I’ll try to simplify as much as possible . . . first, you probably understand that corporations are owned by shareholders. When a company “goes public” – what it’s doing is selling its shares to investors.

There are maybe 20,000 corporations that are traded by investors in the open market. These investors need some place to go to find buyers and sellers of their shares. NYSE and Nasdaq are the places where they go. Within these plases, there are market makers who actually buy and sell the stocks from willing buyers and sellers. Those market makers make their money by buying from you a share of stock for .25 and then selling it to me for .40. So they just made 15 cents.

Dow Jones is a little different . . . they track these stocks and report on them. The Dow 30 or the S&P 500 are the list of 30 or 500 companies that are tracked every day. When the trading prices of the 30 or 500 companies goes up, then the “composite score” of the Dow 30 goes up. Of course, it’s a bit more complicated than that, but you could have a whole course in a graduate level finance course on this topic alone.

I hope this helps. You could go to www.investopedia.com and go to the dictionary and type in common financial phrases and it will tell you the basics!

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