A stock market is a network of trading activities that enable people to buy and sell shares of companies. It plays a vital role in modern economies by enabling money to move between investors and companies. People purchase stocks for a variety of reasons. Some may be interested in income from dividends, while others might buy low-priced stocks with the hope that their value will rise. Others might want a say in how companies are run by voting at shareholder meetings based on the number of shares they own.
Most stocks are traded on a public exchange, like the New York Stock Exchange or Nasdaq. Each day the exchange matches stock sellers with buyers. The seller can be a company that offers shares in its initial public offering (IPO) or other individuals who wish to sell their shares. Intermediaries, such as brokers, facilitate the transaction by matching a buyer’s “bid” price with a seller’s “ask” price. The difference between the two is called the spread.
The stock market’s prices are determined by supply and demand. For example, if many investors are interested in buying a stock, the price will go up, which may entice current shareholders to sell their shares. Stock prices are also affected by news events, economic trends and third-party analysis. Keeping up with a wide range of financial news sources, including reputable financial sites and TV networks such as CNBC, can help beginners become familiar with the jargon and concepts involved in the stock market.
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