Stock market is a general term for the many marketplaces or exchanges where stocks and other investments are bought and sold. People invest their money in the markets, hoping that their investments will grow in value. The stocks that are traded on the markets can be in companies of all kinds, from large retailers to tech firms to real estate investment trusts (REITs). The stocks may also represent bonds or commodities such as oil, wheat and coal.
The basic idea is that a stock’s price is determined by demand and supply, with buyers and sellers continually negotiating prices with each other. The prices are published as they are agreed upon, with investors and traders able to see the prices in online brokerage accounts or on graphs that show them over time. The demand for a particular stock is often shaped by how profitable the company is; as the company becomes more profitable, its stock’s price will rise.
A stock’s price can also be influenced by economic conditions, such as unemployment, which may cause stock prices to fall or, conversely, tax cuts that may boost the economy and therefore push up stocks. The overall health of the market is important to the economy, as it can help businesses access capital to expand and hire new workers; it also helps them pay dividends to shareholders.
Speculators can buy and sell shares directly on the markets, with regulators regulating margin requirements to ensure that anyone who wants to trade has enough money to do so safely. Individuals can also use brokers to purchase and sell stocks for them, although most do so through online trading platforms on their computers or phones.
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