What is Stock Market And How It Works? 3 Best Stocks in 2021

There are many possibilities to invest in the stock market, both on the French or European market but also on the world market, in particular through the major stock exchanges of the world such as those of New York, Frankfurt, London. or Tokyo.

Through this article, we will give you an explanation of the stock market, how to invest in it, how stock market works and in which best stocks to invest in 2021. 

The Stock Market: What Is It?

The stock exchange is a very large market where buyers and sellers meet. Financial assets such as stocks, bonds, currencies or investment funds are traded there . As in all markets, the principle of supply and demand is essential. This very simple law shows us that:

  • The more the demand for an asset increases, the more the value of that asset will also increase
  • The more the demand for an asset decreases, the more the value of that asset will decrease

The price of an asset is therefore determined by the balance between supply and demand. If this equilibrium remains stable, the price variations will only be very small.

This balance between supply and demand can be upset for several reasons:

  • The financial results disappointing relative to expectations and forecasts
  • The announcement by the issuing company of the takeover of another company
  • External events such as economic , political or health crises which can fuel uncertainty and plunge stock prices
  • The publication of a note from a financial analyst that encourages people to buy or sell the company’s stock
  • Changes in the price of raw materials or currency rates

In general, anything that directly or indirectly affects the situation of a company is likely to modify its balance between supply and demand and therefore the stock market price.

The various stock exchanges make it possible to centralize stock market operations and to group together some of the largest national or trans-national companies within stock market indices such as the CAC 40, the DAX or the NASDAQ.

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How Does The Stock Market Work?

If we focus on equities, they are assets issued by companies to finance their activity. Each share represents a fragment of the company’s capital and gives the right:

  • A possible dividend payment
  • Has voting rights at the General Assembly

Thus, by owning shares in a company, you are a stakeholder in the decisions that will be made. Your voice can be heard in proportion to the share of the capital you hold. A greater number of actions therefore means that your voice will count all the more.

For the companies in which you invest, the issue of shares also responds to an economic logic: that of developing the activity.

Market capitalization makes it possible to estimate the financial weight of a company . For example, a company that has put 100 shares on the market at 100 euros will have a capitalization of 100 * 100 = 10,000 €. So a low stock price is not indicative of a poor health.

If we take the example of two CAC 40 companies, Axa and BNP Paribas. The two companies have roughly similar market capitalizations: 45 billion euros for BNP Paribas and 41 billion euros for Axa. The share prices are very different, since they vary (as of August 6, 2020), almost double:

  • € 36 for the BNP Paribas share
  • € 17 for the AXA share

Since market capitalization takes into account two elements, namely:

  • The number of actions
  • The price of each action

It can be deduced from this that the AXA group has issued many more shares than the BNP Paribas group. However, this does not bode well for better or worse financial health.

To invest in the stock market, you will need a broker who will be the intermediary and will allow you in particular to buy shares. We recommend reading our guide to finding the best stock brokers , or the best stock market apps.

The 3 Best Stocks For A Diversified Portfolio

  1. Walt disney co

Disney has been one of the stocks most affected in 2020, as the majority of its services have been compromised by health measures. Cinemas and amusement parks have been closed, film production has been halted and live sports suspended. In November 2020, the stock had fallen by nearly 20% compared to the price at the beginning of the year, then the recovery began from April.

Since the beginning of November 2020, Disney’s share prices have appreciated by 50%, mainly due to the rise of Disney +, its streaming service. Disney + launched in November 2019 and now has over 87 million subscribers.

The group originally planned to receive 60 to 90 million subscribers by 2024, but this goal has already been met. Today, Disney expects to have between 230 and 260 million subscribers on Disney + by 2024 and 350 million subscribers in total with the Hulu and ESPN + services. Compared to Netflix’s 193 million subscribers, Disney has become its biggest competitor.

In addition, the company plans to increase film production to 100 new films each year, which will be greatly facilitated by the planned reopening of theaters. The reopening of parks and seaside resorts will only increase Disney’s activity from 2021. Walt Disney is a blue chip stock with a long history, which investors often buy for the long term.

  1. Adobe

Like other tech companies, Adobe also had a successful 2020 as a lot of companies encouraged telecommuting. In 2020, the stock has climbed about 50%, and 170% over the past three years.

When the COVID-19 pandemic struck, businesses turned to services like Zoom, or Adobe Connect for remote work and communication. This is why Adobe has not experienced a drastic turnaround. But as businesses have adapted to telecommuting, there has been the need to push for cutting edge solutions.

Adobe is working on cloud computing solutions such as Adobe Experience Cloud for enterprises. In fact, the group has already partnered with Microsoft on this initiative which uses AI to collect user data, and conduct online marketing campaigns.

The group’s forecast for 2021 is higher than what market analysts expect, illustrating the company’s confidence in its products and services.

  1. Newmont Corporation

Many analysts and experts are speculating that 2021 could be the year when investors look for safe assets. Gold is the preferred asset during an economic downturn, and one way to invest in this metal is to buy shares of one of the world’s leading gold diggers.

The company’s stock rose 24% in 2020 under the uptrend in the price of an ounce of gold. Newmont shares are very attractive, with in particular EPS (earnings per share) estimated at $ 4.15 in 2021. With the expectations of an increase in inflation in the United States, the demand for gold will probably increase in the years to come, and bring the Newmont share price with it.

In addition, Newmont has a return of 2.7% after issuing $ 1.6 per share in dividends for 2020. Dividends make the share worthwhile for a long-term investment. Additionally, the company’s CEO Tom Palmer plans to produce 6 million ounces of gold per year, or more, for at least a decade.