The stock market isn’t just about buying and selling stocks. It’s also about how those stocks are priced and where they’re traded. It’s a vast network that connects buyers and sellers of shares in publicly-traded companies around the world, protected by laws against fraud.
Stocks are a way for private and public companies to raise money for growth. They’re usually listed in a stock exchange, like the New York Stock Exchange or Nasdaq, either through an initial public offering (IPO) or by listing shares with an existing investor willing to sell them. These shares can then be bought and sold among investors for cash. Stocks are traded on a computerized system that matches many buyers looking to buy stocks with many sellers who want to sell them. This process of price discovery determines how much to pay for a share, and whether a stock will rise or fall in value.
A stock’s price can go up or down for many reasons, ranging from the success of a company to a news event out of its control. For example, a company may have to recall a product or fire the CEO. These types of events, along with the opinions and expectations of other investors, drive a stock’s price up or down.
Most people who invest in stocks do so with the goal of increasing their wealth over time by recouping their original investment plus earning dividends. It’s possible to do so without being an active trader by investing in low-cost funds that track the overall market, such as index funds and exchange-traded funds (ETFs). These investments often mirror a given benchmark, meaning they might rise or fall when the market does.