The stock market is a massive network of people who buy and sell shares of publicly traded companies. It distributes control of some of the world’s largest companies among hundreds of millions of individual investors. Their buying and selling decisions determine the value of those companies. It also lets people participate in the profits of companies by purchasing and selling their shares. It’s a key element of modern economies.
A share represents a fraction of ownership in a company. Large public companies have billions of shares, and each one moves up or down in price depending on factors like a company’s earnings and profitability from the goods or services it offers. The price of a stock can also be affected by how other markets are doing, and the state of the overall economy.
Investors buy and sell stocks through a network of stock exchanges, such as the New York Stock Exchange or Nasdaq. Companies list their shares, or equities, on the exchange when they first raise money from the public through an initial public offering (IPO). The stock market’s job is to match buyers and sellers who are interested in a specific stock. Intermediaries, such as brokers or online trading platforms, negotiate prices between buyers and sellers. A buyer offers a “bid” and a seller offers an “ask,” and when the bid and ask match, a sale takes place.
Investors use different strategies to manage their stocks, from simply holding on to them and waiting for a return on their investment, to borrowing against the value of their shares (with interest) to increase their chances of a profit. Many people who invest in the stock market do it for financial reasons, but some do it to have a say in how a company is run through voting at shareholder meetings.
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