The Stock market is where investors can buy and sell shares of public companies, which means they’re part owners of those businesses. Investors can potentially make money if the value of their shares go up, and companies can raise capital to grow their business by selling shares. The market also brings together people who want to invest in stocks and those who are looking to sell them.
Investors can buy or sell stocks on a number of exchanges, including the New York Stock Exchange and Nasdaq. They can do so through a broker, who matches people who want to buy and those who want to sell, using computers to facilitate the trades almost instantly. The price of a stock is driven by supply and demand, which depends on factors like how much people believe a company will profit in the future. For example, tax cuts can drive stock prices up, but high unemployment could cause them to fall.
People can invest in individual stocks through investment firms, but a more common way is to use mutual funds or exchange-traded funds that hold diversified mixes of hundreds of stocks. That can help you benefit from the returns of the overall market or a particular sector without having to research stocks yourself, though those funds come with their own risks, too. Business reports generally reference the performance of various indexes as a proxy for the entire market. These include country-specific indexes like those for the United Kingdom or Japan, and industry-specific ones that track stocks in industries such as energy or health care.