A stock market is a network of buyers and sellers for company shares. It allows people to grow their money over time while supporting other companies and the economy as a whole. While the concept can seem overwhelming, there are many reasons to get involved with investing.
Many people hear about the stock market through indexes like the Dow Jones Industrial Average and the S&P 500, which are used on news programs to quickly communicate market movements. The reason people listen to these numbers is that the stock market directly affects millions of Americans’ savings, 401(k) accounts and other investments.
When a new company raises capital by selling shares of its business, it begins trading on the primary market and then later the secondary market, where anyone with a brokerage account can buy or sell its stocks. The stock price of a share changes based on demand from investors wanting to buy more and supply from current owners who want to sell.
A number of factors influence the stock price, including a company’s financial performance, economic conditions and other market news. Investors also make decisions based on their own personal beliefs and goals. This means that what one investor finds risky may seem completely safe to another.
The stock market is regulated by federal and state agencies, including the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). These organizations create rules for all market participants to follow that ensure fair trades and protect investors. They monitor large market participants, such as banks and investment funds, and smaller ones, like individual investors, to make sure they are following the law.