The stock market is a vast network of trading activities that connects people seeking to buy or sell shares in public companies. A share is an ownership stake in a company, and owning stocks gives you the right to a part of the profits the company makes, often paid as dividends. You also have a voice in company decisions by voting on company matters, depending on the class of shares you own. The market is heavily regulated to prevent fraud and other unfair trading practices.
To trade, investors and traders meet on exchanges like the New York Stock Exchange or Nasdaq to match buyers with sellers. If demand is higher than supply, the price goes up; otherwise it goes down. The price is not set in stone, and the last price a buyer and seller agreed on shapes future prices.
There are many reasons why people invest in the stock market, ranging from the desire to grow their savings over time to supporting other businesses and helping the economy as a whole. Some choose to buy individual stocks, while others opt for more diversified options such as mutual funds and exchange-traded funds (ETFs), which pool the money from several investors to purchase baskets of stocks.
The stock market is a global phenomenon, and the impact of events in one part of the world quickly reaches the other. It drives the funding for technological advances in smartphones and medications, as well as influencing job creation and layoffs. It’s a vital component of modern economies.