The stock market refers to a system of exchanges, like the New York Stock Exchange and Nasdaq, that connect those who want to sell their shares with those who want to buy them. The markets act as a clearinghouse to track supply and demand, which influences the price of each share. Share prices can go up or down, depending on the company’s fortunes, market trends and any specific news events that might impact their value.
In the beginning, people invested their money in private companies by handing over cash for shares of that business. Over time, as those businesses grew and prospered, their values increased. That increase meant that investors could sell their shares for more than they paid for them, making a profit on their investment. Today’s stock market is a complex ecosystem of computerized trading that matches many investors who want to buy with others willing to sell.
Investors typically have a long-term time horizon, but some are also short-term traders who seek to capitalize on small changes in price to make a quick profit. Long-term investors tend to diversify their investments, holding on to their shares through economic good times and bad.
There are also stocks and mutual funds that are designed to be low-cost, and those can work well for those who are investing small amounts of money. These investments may have lower minimum investments, and many brokerages now offer $0 account minimums and allow for fractional trading to make it easier to invest smaller dollar amounts.
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