If you’re just starting out, the stock market can feel like a foreign language. But with a little research, you can learn how it works and the lingo so that investing in the future doesn’t seem so intimidating.
The stock market is where companies sell shares—a piece of ownership in the company—to investors. The value of the shares can rise or fall over time, based on a variety of factors, including financial news and economic forecasts. When the stock price goes up, investors make a profit. When the stock price falls, investors lose money. Companies sell shares to raise capital and grow their businesses. They can also buy shares from other investors to reduce their own risk or make a profit.
Today, the stock market takes place mainly in electronic exchanges and alternative trading systems. These systems match people who want to buy or sell shares at a specific price (called the bid and offer price) with others willing to do so. These systems use computers operating at high speed to find matches. Investors can also invest in funds—mutual funds and exchange-traded funds (ETFs)—that hold stocks or other assets, such as bonds, in a range of industries.
Some of the largest investment firms trade on the stock market, but there are many other participants, including individual investors who invest for their own accounts through brokerages. These individuals can range from beginners to experienced traders. You can choose a broker that offers the type of investment you’re interested in, as well as the features and customer service you want.
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