The stock market can feel like it’s speaking a different language, one you want to understand but can’t quite grasp. But you can learn some of the lingo, and know what to expect from a broader investment picture that’s driven by many factors.
A stock market is a place where people can buy and sell shares of publicly traded companies. Each share represents a partial ownership stake in a company; as the fortunes of a business rise and fall, so do the prices of its shares. When you hear news reports that “the market is up” or “the market is down,” they’re usually referring to a specific index, such as the Dow Jones Industrial Average and the S&P 500. Investors track the performance of these indexes as a gauge of the overall health of the stock market.
Each day the stock market pairs stock sellers with investors who are interested in buying their shares. These buyers can be individual investors who are purchasing shares through a broker or exchange-traded funds (ETFs), which combine stocks and other assets like bonds. They can also be companies selling their initial public offerings through a process called an IPO or direct listing.
Buyers and sellers interact through a network of markets called an exchange, with each exchange serving a particular region or country. The most well-known exchanges are the New York Stock Exchange and Nasdaq, but there are others throughout the world. The exchanges provide real-time trading information about the securities being offered, and facilitate price discovery by matching buyers and sellers.
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