How we can understand the stock exchange

Exchange for beginners: what are counters and points?

share

Anyone who buys a share on the stock exchange is buying a share in a company. It's tiny, of course, but it still has rights. For example, you get a percentage of the company's profits and can come to the general meeting.

When you sell a share, the rights are transferred to the new owner.

Corporation

Companies have to give themselves a legal form when they are founded. One possibility is the public limited company. Among other things, it is characterized by the fact that it belongs to many thousands of people. The share serves as proof of this possession.

Public companies are legally obliged to act in the interests of their owners, that is, to make as much profit as possible.

bear

The bear symbolizes the bad time on the stock market. There are many sellers but few buyers; the prices for the securities go down. If things get really bad, the stock market collapses.

As a donkey bridge, you can remember that the bear hits the course down with its paw. The technical term also begins with a B: bear market.

Cop

The bull stands for the good time on the stock market. Everyone is buying and selling as if unleashed, the prices of securities rise.

As a donkey bridge, you can remember that the bull is heading for the horns and flinging it up. The technical term is "bull market".

DAX

Dax stands for "D.eutscher A.ktienindex ". Stock companies are bundled in an index according to certain categories. With the DAX, it is the 30 German companies that have the highest value on the stock exchange and whose shares are most in demand.

The jagged curve you see on the stock market news shows the value of stocks, with companies being weighted differently. This value is determined every second.

depot

Depots are virtual folders for stocks that are set up by banks. The banks can of course pay for these services. The problem: you can't buy shares without a deposit.

German Stock Exchange

The Deutsche Börse in Frankfurt am Main is one of the world's largest stock exchanges. It belongs to Deutsche Börse AG, which has numerous other subsidiaries and is listed in the Dax. Like all stock exchanges, Deutsche Börse is controlled by the Federal Financial Services Agency (BaFin).

High frequency trading

In high-frequency trading, computers buy and sell securities independently. The computers are programmed in such a way that they react to the smallest price fluctuations in a fraction of a second. The profits are usually only a few tenths of a cent, but the bulk makes the business worthwhile for the operators.

index

An "index" is used when several companies are grouped together and their stock values ​​are presented as a single value. The large indices are also known as the leading indices. These include the Dax, as well as the Dow Jones in the USA, the Euro STOXX in Western Europe and the Nikkei in Japan.

In turn, smaller indices can refer to these leading indices. It is not known how many indices are registered on the stock exchanges, but it is likely to be tens of thousands. Indices are mostly invented by stock exchanges and banks.

Investment funds

A fund is like a basket with many different stocks in it. In addition to stocks, these are primarily government bonds. Diversity is intended to reduce the risk of loss, true to the motto: Some paper always wins. Funds are usually managed by bank employees who have this service paid for.

course

When stockbrokers speak of the "price", they mean the price that the securities are currently fetching on the stock exchange. The prices are determined by the exchange traders and often change every second. The stock charts with their jagged curves show how prices have developed.

Pension funds

Pension funds are used worldwide to provide old-age security for public employees and employees. The principle is similar to that of life insurance: The members transfer part of their salary to the pension fund, which increases it through investments. When people retire, they receive a previously agreed amount.

The largest pension funds have assets of up to $ 3,000 billion, making them some of the secret giants of the financial industry.

Private equity firm

Private equity companies buy shares in companies or even entire companies with the aim of driving the return so high that it is worth reselling. Private equity companies are feared because they often achieve higher returns by cutting jobs and closing or selling less lucrative parts of the company.

Points (counter)

The dots show how the value of the Dax has developed in relation to its initial value in 1987. At that time, the initial value was (arbitrarily) set at 1000 points.

If the stock market closes at 800 points today, the Dax is below the value of 1987. If it is 10,000 points, the Dax value has increased tenfold since 1987.

So far, the value of the Dax has risen. "Points" and "counter" mean the same thing. When the stock market news says that the Dax has risen by two percent compared to the previous day, this refers to the previous day's score.

Shadow banks

Shadow banks are similar to real banks except for a few key points: They do not keep accounts, do not take savings, and they are prohibited from creating money when they make loans.

Because the banking supervisory authority only examines banks that perform these classic banking functions, the shadow banks can grant and speculate almost unsupervised. Typical shadow banks are fund and holding companies as well as hedge funds.

Government bond

States constantly need money to finance government spending. Among other things, they borrow it from investors. The promissory notes that investors get are called "government bonds".

The interest is based on the probability with which the states will repay the money. Government bonds have fixed and usually longer terms, but can still be traded on the stock exchange.

Sovereign wealth fund

Many countries invest money in sovereign wealth funds. The world's largest sovereign wealth fund is "Norges Invest" from Norway, which is worth around 825 billion euros and is fed from the income from state oil production. The Gulf States and China also have large sovereign wealth funds.

SWFs invest their money primarily in government bonds, stocks and real estate, but are also increasingly investing in riskier hedge funds and private equity companies.

Asset manager

Asset managers make their money by trying to invest other people's assets as profitably as possible. In addition to wealthy individuals and families, companies, insurance companies and pension funds also make use of the services of asset managers.

Over the past few decades, asset managers have become the most powerful players in the financial industry. The world's largest asset manager "Blackrock" has an investment capital of 5.4 trillion euros (= 5400 billion euros) and more money than anyone else in the world.

Security

Shares, funds, bonds and derivatives can also be summarized under the heading "security". The word comes from the time when investors actually got papers.

Xetra

Xetra is permanently present as lettering in the stock market news. The made-up word is made up of "Exchange Electronic Trading" and stands for the computer system through which almost all purchases and sales of securities run on the Frankfurt Stock Exchange.