Understanding Stocks and the Korean Stock Market: Basics, Investment Tips, and Market Insights
Stocks are more than just an investment tool—they are a key to understanding companies and the broader economy. In this article, we will explore what stocks are, their history, purpose, characteristics, key investment considerations, and the current status of the Korean stock market.
1. What Are Stocks?
Stocks represent shares of a company’s capital, giving holders partial ownership of the company. People who own stocks are called shareholders. They may receive dividends, and in the case of common stock, they can also exercise voting rights in corporate decisions.
Stocks are freely traded in the stock market, with prices constantly changing according to supply and demand.
2. History and Origin of Stocks
- World’s First Stock Exchange: Established in Amsterdam in 1602. The Dutch East India Company issued the first stocks, laying the foundation for modern stock markets.
- First Stock Company in Korea: Kyungsung Spinning Company, founded in 1919 by Kim Seong-su (founder of Dong-A Ilbo) and Kim Yeon-su (founder of Samyang). This marked a pivotal point in the history of Korean capitalism.
3. Why Companies Issue Stocks
Companies issue stocks to raise capital for expansion, research and development, or operational needs. This allows them to attract external investment and provides a foundation for growth. It also enables ownership distribution, reducing concentration of control.
4. Key Characteristics of Stocks
- Divisible Ownership: Multiple investors can own a part of the same company.
- Common vs. Preferred Stocks: Common stocks come with voting rights; preferred stocks have priority in dividends but typically no voting rights.
- High Liquidity: Stocks can be easily bought and sold in the market.
5. Why Stocks Are Important
For companies, stocks are a capital-raising tool, and for investors, they are an opportunity to grow wealth. Stocks provide profits through dividends and price appreciation and serve as a critical indicator of economic trends and health.
6. Why People Invest in Stocks
- Opportunity to grow assets
- Participate directly in corporate growth
- Utilize various investment strategies
- Hedge against inflation
7. Structure of the Stock Market
The stock market is divided into two main segments:
Primary Market
- Where companies issue stocks for the first time.
Secondary Market
- Where previously issued stocks are traded among investors.
All trading occurs on stock exchanges, with prices determined by market supply and demand.
8. Important Considerations When Investing
While stocks offer the potential for high returns, they also carry risks. Investors should make decisions based on thorough analysis and information. Managing risk through diversification and long-term investment is essential. Most importantly, emotional discipline is key to being a successful investor.
9. Overview of the Korean Stock Market – Listings and Delistings
- As of 2024: KOSPI listed companies: 709 | KOSDAQ listed companies: 1,663
Annually, approximately 10–20 companies are newly listed on KOSPI, and 100–130 on KOSDAQ. At the same time, 50–70 companies are delisted.
This highlights that while new opportunities constantly arise, competition is also fierce—an important insight for investors.
10. Conclusion
Stocks are not just financial instruments—they are a tool to understand corporate growth and economic trends.
With proper knowledge and strategy, stock investing can help individuals increase wealth while deepening their understanding of the economy.
Careful preparation and wise decision-making are key to becoming a successful investor.
Exploring the Korean economy in greater depth
About the Author
