A stock market is a marketplace that brings together people who want to sell investments and those who want to buy them. Stocks are a popular type of investment because they can rise in value as the companies they represent grow, which can lead to returns for investors.
A share of a company’s stock represents part ownership in that company. When a company grows, its stock price can also rise as more investors become interested in owning shares. Companies use stocks to raise money to invest in themselves and grow their business. Investors then buy those shares in hopes of getting a return on their investment.
Investors trade stocks through exchanges, such as the New York Stock Exchange and Nasdaq. People who want to buy a stock match up with others who want to sell it through brokers, who facilitate the transaction almost instantly. Prices can change based on supply and demand, but also because of large economic factors that influence how much investors believe a specific company will grow or fall in value.
Many people follow the market through indexes such as the Dow Jones Industrial Average and S&P 500, which track a broad range of public companies. These indices can be useful because they allow you to see how the overall market is doing and what sector — such as technology or energy — is performing. In addition to large market and economic factors, individual stocks can gain or lose value because of news about the company or changes in management.
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