Actual market

Actual market

In finance, the concept of the actual market is a key factor. It depicts the price at which a given good, service, or asset is currently sold in the market, acting as a live indicator of supply and demand dynamics. Investors and financial analysts must have a thorough understanding of the market to assess the success of their investments and decide whether to acquire and sell assets. Financial ratios like market capitalisation, frequently employed in financial research, are calculated using the real market value as one of their primary inputs.  

What is the actual market? 

An actual market is where goods like grains, crude oil, gold, or RAM chips are purchased and traded for cash and delivered right away. It is also known as the spot market or cash market. It represents the amount buyers are willing to pay for a particular item in the current market environment.  

The actual market is influenced by various factors, including supply and demand, economic conditions, and investor sentiment. The actual market is used as a benchmark in financial research to assess the performance of an investment or portfolio. It is also used to compute crucial financial ratios, such as market capitalisation and price-to-earnings ratios, which determine the worth of various assets. 

Understanding actual market 

The actual market refers to the real-time market price of a product, service, or asset at any given point in time. It represents the amount buyers are willing to pay for a particular item in the current market environment. Investors and analysts use the actual market value as a critical metric to evaluate the performance of an investment or portfolio. They monitor changes in actual market value to evaluate if an asset is overvalued or undervalued compared to other assets.  

The actual market value is also used to calculate important financial ratios, such as price-to-earnings ratios and market capitalisation, which can provide insights into the overall health of the market and the performance of different assets. Understanding the market is crucial in making informed investment decisions and managing risks in a rapidly changing market environment. 

Importance of actual market 

Since it reflects the going rate for a good, service, or asset, the actual market value is significant in economic research. It gauges the price buyers are prepared to pay for a certain asset, providing insight into its total worth and potential performance.  

 To determine crucial financial ratios like price-to-earnings and market capitalisation, actual market values can also be used. These ratios can aid investors in making wise investment choices. In addition, the actual value of a stock is frequently used as a benchmark for assessing the success of a certain investment or portfolio, enabling investors to evaluate their returns and modify their strategy as necessary. 

 The total market value of a company’s outstanding shares, also known as market capitalisation, determines the actual market value of that company. It is common for market value to be higher than book value since it considers profitability, intangibles, and potential for future development. The fact that market value provides an exact method of determining an asset’s worth and removes any doubt or ambiguity is one of the main reasons it is significant. In the marketplace, opinions on a product’s value frequently conflict between buyers and sellers. 

Calculation of actual market 

The actual market’s calculation depends on the market type being considered. In general, the actual market can be calculated as the total number of units of a product or service that are sold within a given period, multiplied by the price per unit. In the stock market, for instance, the number of outstanding shares multiplied by the current share price per share can be used to determine the actual market value of a company’s stock. In the real estate market, the actual market value of a property can be calculated by comparing recent sales of similar properties in the area and adjusting for factors such as location, condition, and amenities. 

Example of actual market 

An example of the actual market value of a company’s stock would be as follows: 

 Consider that company A has 10 million outstanding shares with a market value of US$50 per share. To calculate the actual market value of company X, we would multiply the number of outstanding shares by the market price per share: 

 Actual market value = number of outstanding shares x market price per share 

Actual market value = 10,000,000 x US$50 = US$500,000,000 

 Therefore, the actual market value of company X is US$500 million. This calculation estimates the total value investors have placed on the company’s shares based on the current market price. 

Frequently Asked Questions

Actual price refers to the price paid for a product, service or asset in a specific transaction. In contrast, market price refers to the current price at which a product, service, or asset is traded in the overall market. The actual price may be higher or lower than the market price, depending on supply and demand, negotiation, and timing factors. 

To calculate the actual market value of an asset, multiply the number of outstanding shares of the asset by the current market price per share. The result is the total market value of the asset at that particular point in time. This is a straightforward method of determining a firm’s value to traders. This value changes per market force, much as the market price. 

The various types of markets are: 

  • Actual market: The current market price of a product, service, or asset. 
  • Primary market: The market for new securities issued by companies or governments. 
  • Secondary market: The market for trading previously issued securities. 
  • Spot market: The market for immediate delivery of goods or securities. 

The actual market provides a real-time indicator of the demand and supply dynamics in the market, allowing investors and analysts to evaluate the performance of their investments and make informed decisions. It is also essential in calculating important financial ratios, such as market capitalisation and price-to-earnings ratio. Understanding the market helps manage risks, identify investment opportunities, and predict market trends. The actual market provides valuable insights into the overall health of the market and the performance of different assets. 

Related Terms

    Read the Latest Market Journal

    Unlocking Stock Market Potential with AI

    Published on May 24, 2024 48 

    Introduction of AI In the world we live in today, artificial intelligence (AI) is almost...

    Financial Sectors Thriving: Top Traded Counters in April 2024

    Published on May 21, 2024 80 

    At a glance: The Federal Reserve (Fed) held interest rates steady at 5.25% to 5.5%...

    One Dollar at a Time: The Potential of Fractional Shares

    Published on May 20, 2024 75 

    Table of contents 1. Introduction 2. Dollar-Cost Averaging 3. Popularity of Dollar-Cost Averaging 4. Small...

    Unit Trusts vs Exchange Traded Funds (ETFs) – Which is better for your portfolio?

    Published on May 20, 2024 78 

    Imagine you are dining at a nice restaurant, feeling overwhelmed by the variety of seemingly...

    Weekly Updates 20/5/24 – 24/5/24

    Published on May 20, 2024 21 

    This weekly update is designed to help you stay informed and relate economic and company...

    What is CFD? With 2 Practical Examples

    Published on May 15, 2024 105 

    In this article, you will learn what CFD (Contract for Difference) is, the costs and...

    What is ESG investing, and why is it important?

    Published on May 15, 2024 110 

    Over the last five years, Environmental, Social, and Governance (ESG) investing has evolved from being...

    What are fixed-income funds?

    Published on May 15, 2024 62 

    In the diverse world of unit trusts, various funds employ distinct investment strategies aligned with...

    Contact us to Open an Account

    Need Assistance? Share your Details and we’ll get back to you

    IMPORTANT INFORMATION

    This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

    An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.  

    Investments are subject to investment risks including the possible loss of the principal amount invested. The purchase of a unit in a fund is not the same as placing your money on deposit with a bank or deposit-taking company. There is no guarantee as to the amount of capital invested or return received. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved.  

    Where applicable, fund(s) may invest in financial derivatives and/or participate in securities lending and repurchase transactions for the purpose of hedging and/or efficient portfolio management, subject to the relevant regulatory requirements. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products.  

    The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <www.phillipfunds.com> for more information in relation to the dividend distributions.  

    The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.  

    The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. Any member of the PhillipCapital Group of Companies may have acted upon or used the information, analyses and opinions herein before they have been published. 

    This advertisement has not been reviewed by the Monetary Authority of Singapore.  

     

    Phillip Capital Management (S) Ltd (Co. Reg. No. 199905233W)  
    250 North Bridge Road #06-00, Raffles City Tower ,Singapore 179101 
    Tel: (65) 6230 8133 Fax: (65) 65383066 www.phillipfunds.com