The stock market is a network of exchanges that allow anyone to buy and sell fractional ownership of public companies. It distributes the control of some of the world’s largest companies among hundreds of millions of individual investors, whose buying and selling decisions help determine a company’s value.
A share of a publicly traded company gives you the right to part of a company’s profits, paid in the form of dividends, as well as the opportunity to vote on company matters. A successful company can grow its value in two ways: by paying dividends or by increasing its stock price. The stock market is regulated to ensure that traders and companies abide by strict rules.
The stock market’s most basic function is to match buyers who want to purchase a certain stock with sellers who are willing to sell it for that price. The market’s prices rise and fall based on supply and demand, as well as the impact of new information on a company’s stock price.
A healthy stock market helps fund many technological advances like smartphones and medications, and it can also impact jobs and property values in middle-class neighborhoods across America. The market can move for a number of reasons, but large economic and political factors tend to affect most stocks in similar ways. You might hear the news that the market is up or down, but more often you’ll hear about stock market indexes such as the S&P 500. These represent large sectors or even entire markets and help track overall performance without tracking thousands of individual stocks.
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