A stock market is a marketplace where shares (ownership) of companies are bought and sold. Buying stocks gives you a stake in the company’s success, and you may also receive dividends (income). If the company does well, its share price goes up; if not, its share price falls. These price movements can be scary for many investors. But the stock market has a long track record of providing solid returns over time, even when it’s volatile from day to day or year to year.
The stock market is regulated by agencies like the Securities and Exchange Commission, which protects investors from fraudulent trading practices and maintains fair and efficient markets. The stock market is central to modern economies, and it’s where most people invest their savings for retirement and other purposes.
A company sells shares in the stock market to raise money to grow its business. When the company does well, its share price goes higher, attracting more buyers. If a company does poorly, its share price falls, and current shareholders might get rid of their shares to cut their losses.
To buy and sell shares, people use a broker or online trading platform. The platforms match potential buyers and sellers of a given stock by offering “bid” and “ask” prices: the bid is the lowest amount that someone is willing to pay for the stock, while the ask is the highest price that the seller is willing to accept. When the bid and ask match, the trade goes through.
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