The stock market is a vast network of trading activities that enable money to move from investors to companies. It plays a key role in our modern economies, funding innovations like smartphones and medications that require billions of dollars for research and development. Market moves can also influence business decisions, creating new jobs or laying off workers. It’s important to understand how the stock market works and its lingo so you can make informed investments.
You can participate in the stock market by opening a brokerage account at an investment firm. Until recently, most people opened these accounts with a financial professional, but now many brokerage firms offer online platforms that allow you to buy and sell securities without the help of an adviser. Once you’ve set up an account, choose a broker that offers low fees, a wide selection of investment options and good tools for researching and managing your portfolio.
Stock market prices rise and fall based on the laws of supply and demand. If lots of investors want to purchase a particular stock, its price will go up. Alternatively, if not as many investors are interested in purchasing the stock, its price will fall. Investors consider two broad categories of factors when assessing a stock’s price: fundamental and technical.
In general, companies raise funds for their operations by selling shares of the company, or equity, to investors. Then they trade these shares on an exchange, such as the New York Stock Exchange or Nasdaq. The exchange acts as a matchmaker, matching buyers and sellers of a security at a transparent price.