A stock market is a place where people buy and sell shares of publicly traded companies. It serves two main purposes: it helps companies raise capital by offering shares and it provides millions of investors with an opportunity to earn returns on their investments.
The stock market is a vast network of trading activities that includes the companies selling their shares, the investors who buy and sell them and the exchanges and indexes that track the prices of individual stocks. These markets are governed by strict rules that ensure fair trading practices and protect investors from fraudulent or unfair trading.
Stocks represent fractional ownership in a company and each share represents one part of a company’s total value. Companies issue shares in order to raise the money needed to grow their business. Investors then purchase these shares for a variety of reasons. Some investors look to collect dividends (a regular share of a company’s profits) while others invest in shares that they believe will appreciate in price over time.
In a basic sense, the stock market works by matching supply and demand for the stocks available. Each investor or trader that decides to buy a share shapes the overall demand for that stock, which, when combined with the supply of shares in the market, produces the prices you see listed on your online brokerage account or in business reports. There are many reasons why specific stocks rise and fall, but the overall movement of the markets is shaped by large economic factors such as GDP growth, unemployment, consumer spending and inflation.