The stock market distributes control of some of the world’s largest companies among hundreds of millions of individual investors, who collectively determine the company’s value. Like any market, it is constantly adjusting prices to match supply and demand. From the days of in-person haggling to today’s largely digital trades processed by powerful software, buyers and sellers constantly negotiate prices (and then re-negotiate those prices as new information is discovered).
As long as they are publicly traded, companies must adhere to stringent financial reporting regulations that open up our view of their operations and finances. This helps keep investor confidence in the market stable. The stock market is also seen as an economic indicator – rising prices are associated with corporate profitability and growing economies, while falling prices signal problems.
A share of a public company represents fractional ownership in the company and gives you the right to receive dividends and vote in company elections. But the most common reason people participate in the stock market is to grow their wealth over time. This can help fend off the inflation that eats away at your dollar’s purchasing power, and it can enable you to reach financial goals that would be harder to achieve with only a paycheck.
Business reports often refer to “the stock market,” and you may have heard the term used when discussing specific exchanges, like the New York Stock Exchange. But the term is actually a more broad, comprehensive concept that encompasses all exchanges and over-the-counter markets where you can buy and sell shares of a company.
About the Author
