A stock market is a way for companies to raise money by offering shares of ownership in their company. A share represents a fraction of the company, and entitles you to part of the company’s profits (often paid as dividends) and voting rights on company matters.
The prices of stocks rise and fall due to supply and demand. If many investors want to buy a particular stock, the price will go up, and that may entice current stockholders to sell at a profit. Conversely, if there are few buyers for a stock, the price will decline. Buyers and sellers are influenced by a number of factors, from a company’s reported earnings to news of a potential takeover.
Investors use a variety of methods to buy and sell stocks, including brokers and online trading platforms. The Securities and Exchange Commission, and similar agencies worldwide, create rules that protect investors and ensure fairness in the markets. Many of these regulations are based on the idea that investors always have access to all available information at any given time, so stock prices reflect the latest info.
When you hear business reports of the “stock market up” or “down,” they are usually referring to indexes that track the performance of different segments of the overall stock market. Two of the most prominent indexes are the Dow Jones Industrial Average and the S&P 500. These and other indexes are used by many investors as a benchmark for their own portfolios.
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