The stock market is an organized marketplace where investors and traders come together to buy and sell shares in public companies. It’s where we hear about bears and bulls, and lingo like “buy low, sell high” and “never get in over your head.” It also is a platform where people invest their savings and work towards financial goals, including retirement and education.
It started as a way for entrepreneurs to raise money and grow their businesses by offering shares in their companies. Investors would hand over cash and receive shares, becoming part owners of the company with voting rights. When more people want to buy a particular company’s shares, the share price rises. If more current shareholders want to sell their shares, the share price falls.
Stock prices are driven by supply and demand, but there’s more to it than that. The economy and political events abroad can boost stocks or drive them down. Tax cuts, for example, can send stocks up because consumers will have more money to spend and invest. On the other hand, high unemployment can drag down stock prices because consumers have less disposable income.
Traders follow strict reporting rules and trading laws to ensure fair practices and maintain confidence in the markets. Investors can use a variety of trading tools, such as market orders (buying or selling at the ask or bid prices) and limit orders that specify the maximum amount you’re willing to pay per share. There are also indexes that track a broad segment of the market, such as the Dow Jones Industrial Average or S&P 500.
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